Scale Capital eyes EUR 70m-100m for new VC fund by year-end

Karin Jensen
12 July 2022

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Danish VC firm Scale Capital is on the market fundraising for its third fund targeting at least EUR 70m by the end of the year, managing partner Lars Jensen said.

Scale Capital Fund III held a first close on EUR 27m in April and has a hard cap of EUR 100m. The GP is talking to institutional investors such as family offices, pension funds and asset managers.

The fund made its first deal in March with the acquisition of Globus.ai, a Norwegian HR automation company. It is finalising its second investment, Jensen said, with an additional one to two investments planned in 2H22.

Scale Capital invests in early-stage tech companies in the B2B segment, primarily Nordic companies looking to enter the US market and that see the country as its main growth market. It targets five different sectors within tech B2B segment: sustainability, deep tech, digital health, industrial tech and future of work.

Previous funds
Scale Capital Fund II, which raised EUR 20m, has been fully deployed with a total of 10 investments and one exit already completed. Companies in the vehicle include Alphin, Alex Therapeutics, Quantica, Pleaz and Airtame.

In March, Fund II exited of Cylindo, a 3D product visualisation platform for commerce, in a sale to Chaos, a world leader in photorealistic rendering technology, in a transaction that saw a 61% return for the total fund, Jensen said.

There are no exit plans for now, while two or three of the companies are in the process of raising further capital, with Scale Capital expected to raise its investments in the businesses, Jensen said.

Fund I has seen eight exits, including ESC, sold in 2011 to KGH Customs Services, which was acquired by A.P. Moller-Maersk in 2020 for SEK 2.6bn (EUR 245m), as reported. Other exits include Puori and Dynastrom, which obtained a 3.6x money multiple and net IRR of 70% for the fund

Investment plans
Scale Capital typically acquires a 10%-20% stake in a new portfolio company, he said. Targets usually have 20-50 employees and will already have started their growth journeys.

Fund III has a very strong pipeline with investment targets and is expected to make four to five investments per year, bringing the total number of investments to 20, he said.

Scale Capital cooperates with other funds, business angels and advisors all over the Nordic region and has a very good inflow of investment opportunities, Jensen said.

The current financial markets turmoil following Russia's invasion of Ukraine has provided even more opportunities as valuations are falling significantly, Jensen said, in some cases companies it spoke to for a few months ago are now returning with a 50% reduced valuation.

A 2022 vintage for both venture and private equity funds may be the best seen for many years, Jensen said. At the same time, the need to do things more efficiently and in a smarter way will continue to support demand for digitalisation, he added.