VC Profile: Hi Inov in pre-marketing for next fund, outlines plans to wrap up Fund II investment period

The firm kicked off the pre-marketing phase for a new vehicle last month, ahead of Fund II's final investments, she said.

Fund II was established in 2018 and collected commitments of EUR 100m. It has carried out 15 investments and is targeting up to 20, Gombart said.

She declined to specify the exact target size for Fund III but said it would be above its predecessor’s EUR 100m total.

All of Hi Inov’s vehicles have been backed by commitments from the Dentressangle family accounting for up to 30% of their total, while an undisclosed institution invested roughly the same amount. The rest of Fund II’s limited partners (LPs) are regional banks and corporates, she said, declining to give further details.

The venture capital (VC) firm has backed 38 start-ups to date, she said. Last month, Hi Inov invested in a EUR 20m Series C for French online retailing tool for merchant Glopal, alongside Dentressangle, Crédit Mutuel Innovation and existing shareholders Seventure and Axeleo Capital, as reported by Mergermarket.

Macro headwinds
Although investment in technology has become increasingly difficult in recent months, Hi Inov plans to keep on deploying and has carried out three deals since the beginning of 2023, the founder said.

This activity is due to the fact current macro headwinds brought Hi Inov’s potential investments back to “normal” prices, with valuations in line with what was practised in 2017-18, Gombart said. Many large American growth funds which entered the European market over the last two years to invest in Series A and Series B have left the continent, so there is less competition at the moment, she added.

The firm tends to invest alongside experts in SaaS-based platforms and has deployed its vehicles along with US-based BGV, French VCs Demeter, Elaia Partners and ISAI Gestion, as well as Germany-based 42CAP and Senovo.

Hi Inov has been focusing on streamlining the software solutions developed by the companies it supports over the last 12 months, with the aim of reducing data and energy consumption. “A Series A is the right moment in a business’ life to review its technical architecture and adopt sustainable practices,” Gombart noted.

In addition to the technical and energy audit, the firm also promotes diversity and parity in the workforce, she added.

Investment strategy
Hi Inov’s second fund invests mainly in France, Germany, Austria and Switzerland, Gombart said. It deploys EUR 4m-EUR 5m on average as a lead investor in Series A rounds, and above EUR 10m in Series B, she added.

Fund II largely focuses on SaaS-based platforms dedicated to programmers, such as French web application software developer Platform.sh, which raised USD 140m in a Series D funding round last June, she said.

The vehicle has also invested in vertical AI, including French image recognition software publisher Deepomatic, which closed a EUR 10m Series B funding round last December. It has also backed AI-driven insurance distribution platform Zelros, which secured a USD 11m Series A in 2021, she added.

Hi Inov usually invests as a lead investor in exchange for a minority stake and a seat at the board, she said.

The fund targets unprofitable tech companies with less than EUR 1m annual recurring revenue (ARR). The vehicle usually exits companies after six to seven years, when a business completes a Series C and reaches more than EUR 30m annual recurring revenue (ARR).

Fund II targets returns of 13% net internal rate of return (IRR) and 3x money overall, she said.

Based in Paris, Lyon and Munich, Hi Inov was established in 2013 and has 14 start-ups in portfolio at the moment, she said. It employs 16 people, she added.

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