Earlybird holds Growth Opportunity V first close

Harriet Matthews
30 June 2022

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Germany-headquartered venture capital firm Earlybird has held a first close for its Growth Opportunity V fund (GO V), which will target existing and new later-stage companies.

The fund has a EUR 300m target. Orbit is providing legal advice on the fundraise.

Earlybird Growth Opportunity IV was registered in September 2020, according to Unquote Data. It held a final close in mid-2021 on EUR 100m and invested in 10 companies, according to Christian Nagel, partner and co-founder at Earlybird, and its successor vehicle was launched shortly after this.

As of the end of Q1 2022, GO V was performing at 1.7x money and 53% IRR, according to Nagel. GO III's performance currently stands at 2.4x and 39% IRR, GO II is performing at 3.2x and 23% IRR, while the VC's 2009-vintage debut Growth Opportunity fund's performance stands at 2.8x and 89% IRR.

Earlybird sees significant opportunities in its current portfolio in spite of the current macroeconomic environment. "There are valuation discussions in the US that are coming to Europe, which are scaring the European VC community," Nagel noted. "But our outlook remains stable, as we are mostly backing tech-based B2B and some B2C companies. We have stayed away from pure consumer plays like delivery for a long time, so we are not too affected by the reversal of Covid trends or a potential downturn. We are also not focusing on pure pre-IPO types of investments, which are the ones who have been most affected in terms of valuations."

The VC does not have any exits underway at the moment, according to Nagel, but could pursue some next year. "The maturity and performance of our companies means that a few would be ready next year – really they are already ready, but we're not selling or IPOing in this market environment," he said.

In spite of this, the VC is considering other options. "We are open to continuation funds and are currently discussing this option for our older fund generations where there is good performance, as it would be a good opportunity to realise for existing investors and good for new investors to harvest the growth on the next phase," Nagel said.

The GP's latest fundraise follows the final close of its latest Digital West fund in May 2022 on its EUR 350m hard-cap, as reported.

Investors
The fund has attracted new and existing investors so far, Nagel told Unquote. "We have some new LPs who have been looking for growth funds, which are viewed as being different from the pure VC asset class," he said. "The LP base overlaps with investors in our early-stage strategies and we have re-ups from last funds, as well as new relationships, since we are extending our reach in the LP community."

LPs in the GP's newly closed Digital West VII fund include a German insurance firm as cornerstone investor, as well as a range of European, Asian and US-based investors, as reported.

Investments
GO V invests in companies at Series B and beyond, deploying initial tickets of EUR 10m-EUR 15m per company. The vehicle expects to invest in 13-15 companies, more than 80% of which will be existing Earlybird companies that have emerged as winners across its three early-stage strategies: Digital West, Digital East, and Health.

The fund will typically make its investments alongside a third party such as another VC investor, Nagel said.

The fund has made three investments to date: Helsinki-based corporate cloud database and messaging service developer Aiven; Heidelberg-headquartered digital insurance platform Getsafe; and Upvest, a Berlin-based blockchain API developer for the financial services industry.

"We have a couple more investments that we are discussing at the moment," Nagel said of the fund's current pipeline. "Things have slowed down in general, many people are taking the summer and then returning to business afterwards. At the end of last year, people were being rushed into deals and term sheet reviews were being asked for in a couple of days. Now it is a healthier situation and we have more time to consider our investments. Our bar remains high but we have been here before and we know that periods of dislocations represent a great opportunity to make great investments."

People
Earlybird – Christian Nagel, Hendrik Brandis (partners, co-founders).