Earlybird holds EUR 350m final close for Digital West VII

The fund is Earlybird’s seventh vehicle, although it is the second in Earlybird’s dedicated strategy for Western European early-stage startups.

Unquote reported in March 2021 that the VC was on the road for its latest Digital West fund, as well as its second health-focused fund.

The fundraise took around 18 months from start to finish, Ealybird managing partner and co-founder, Hendrik Brandis said. “We’re happy to have closed the fund even in these challenging times – it was oversubscribed, which is testament to the work we have done in our previous funds,” he added.

Digital West VII originally had a EUR 225m target and a EUR 300m hard-cap, but sought permission from its LPs to increase this due to increased demand, Brandis said.

The VC did not work with a placement agent for the fundraise, Brandis said. It received legal advice from specialised fundraising law firm Orbit.

The firm’s first dedicated Digital West fund was half the size of its successor vehicle. The fund held a final close in July 2018 on EUR 175m, surpassing its EUR 150m target.

Earlybird intends to keep pace with the market with the increased size of its new fund, Brandis told Unquote. “The frequency of fundraising has accelerated: the average time between Series A and B has shrunk by 40%, startups are taking more money in order to scale faster,” he said. “Interestingly enough, they are not consuming more money in total – it’s the opposite: capital efficiency has risen significantly over the past five years. There are fewer rounds, but they are larger, which leads to a situation where Series A used to be EUR 3m-5m and are now EUR 7m-10m or even larger.”

In addition to its Digital West and Health strategies, Earlybird manages a Digital East strategy, which focuses on startups in Turkey and CEE. The strategies were split between separate funds from the VC’s fifth fund onwards, Brandis told Unquote.

The GP remains on the road for its latest Health fund, Brandis said, but did not comment further on the fundraise.

Alongside its headquarters in Berlin, Earlybird has offices in Aachen, Munich, London and Istanbul. The VC has also expanded to France with the opening of an office in Paris.

Investors
The fund’s largest LP is a German insurance firm, Brandis said. The LP base is dominated by European institutional investors, but also comprises some investors from Asia and the US, he said.

According to Unquote Data, LPs in the previous fund included insurer Wüstenrot & Württembergische and Draper Esprit (now known as Molten Ventures).

Investments
Earlybird Digital West VII will focus on early-stage Western European enterprise software, fintech and sustainability, with an additional focus on deeptech. The fund has made 17 investments to date, comprising both new and existing portfolio companies. It expects to make 30-35 deals in total.

The fund’s predecessor deployed tickets of EUR 500,000-15m, whereas Digital West VII expects to deploy initial tickets of EUR 1m-10m, with an average ticket of EUR 6m-7m. However, the fund can deploy up to EUR 30m-35m per company, Brandis said.

Earlybird has previously invested in companies including Germany-based digital bank N26, aerospace startup Isar Aerospace and digital freight forwarder Senders.

Asked about the firm’s current deal pipeline, Brandis told Unquote that this remains “highly attractive”. “Creativity and the pace of technology innovation are ever-accelerating,” he said. “We are not seeing any slowdown and this has not been affected by any of the current crises. Many successful VC investments have been in situations where innovation has continued, but entry prices have gone down. Investing into a crisis often makes for a good vintage.”

People
Earlybird Venture Capital – Hendrik Brandis (managing partner, co-founder).

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