Fund in Focus: Daphni holds €150m close for maiden fund

Newly launched venture capital firm Daphni has held a first close on €150m for its maiden fund, Daphni Purple, aiming to support French entrepreneurs eyeing the European market.

Daphni Purple, the target of which was successively increased from €80m to €100m, and finally to €160m, is due to be closed by year-end. The vehicle is a FPCI-type fund (Fonds Professionnel de Capital Investissement) focusing on early-stage and series-A funding rounds, with investments typically amounting to €2-3m. A seed pocket has also been put in place for investments ranging between €300,000-500,000. The fund has a 10-year lifespan, with typical five-year investment and divestment periods.

While Daphni Purple is not sector-exclusive, it will mainly target startups in the tech and digital sectors. Location-wise, Daphni will make deals across Europe in its entirety, including cities perceived to be VC hot spots such as Paris, London, Berlin, Copenhagen, Amsterdam, Helsinki and Stockholm. The first investments should be announced in the coming weeks, according to the GP.

The firm was launched in 2015 by Marie Ekeland, previously at Elaia Partners, as well as Pierre-Yves Meerschman and Pierre-Éric Leibovici, both previously at Orkos Capital, and co-founders Willy Braun and Mathieu Daix.

VC as a platform
Daphni's platform Daphni.com digitalises the investment process in a given company from beginning to end. The advantages this is intended to offer are twofold: for startups, it opens up opportunities to apply for funding and share select company information such as performance and a company description with Daphni's online community; meanwhile, LPs have permanent access to dealflow and full overview of investment opportunities.

Pierre-Eric Leibovici, partner and co-founder at Daphni, explains: "While LPs do not exactly 'choose' the investments we make, they are encouraged to share their opinion on our portfolio, and to interact with business owners on the platform. This spirit of exchange and mutual contribution is at the root of Daphni's philosophy."

Historically, co-investment opportunities were always a promise we made, but to which we never stuck; with Daphni, we wanted this to change" – Pierre-Eric Leibovici, Daphni

What gave birth to the concept, Leibovici says, was the realisation that both LPs and entrepreneurs were eager to build a different investment model, with more transparency and communication between them. "Over time, our interlocutors changed; the type of people we were eventually faced with were decision makers who were not only keen to finance a project, but also to contribute to its overall strategy and evolution. Meanwhile, business owners wanted to move on from 'know-it-all' VCs, and deemed they were entitled to expect a real partnership and genuine intentions behind investors' financial support."

One objection to the permanent flow of information and ideas on the platform is the potential conflicts of interest that may arise over time if, for example, two startups were to compete within the same sector or had a similar project. The issue is easily solvable, according to Leibovici, as members are free to opt out from the community and remove shared information at any point in time.

Investors and co-investors
Investors in the fund so far include institutional private equity investors, such as BPI France via its Programme d'Investissements d'Avenir (PIA), Crédit Mutuel Arkéa, and Swen Capital Partners; banks, including Societe Generale; corporates, such as Fnac-Darty and Nokia; insurers, including ProBTP and MAIF Avenir; business angels, and the European Investment Fund (EIF).

Among the €150m raised so far, €30m was provided by Daphni's 200-strong community of entrepreneurs, executives, academics, artists and advisers, whose task is also to actively contribute to the growth of the VC's portfolio. The idea, Leibovici says, is to have on average a flow of at least 1,000 startups per year on the platform.

An additional unique quality to Daphni is the co-investment opportunities it offers. For each investment made by the fund, LPs are given the opportunity to co-invest without incurring an additional management fee, though investments are capped at the amount originally invested in the fund. "If an investor uses its co-investment capacity in full," says Leibovici, "they instantly get a reduction on management fee costs, which are lowered from the usual 2% to around 1%.

"Historically [within funds where he and his co-founders used to work], co-investment opportunities were always a promise we made, but to which we never stuck; with Daphni, we wanted this to change."

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