Phoenix Court Group raises USD 500m for four VC strategies

The change in the VC firm’s name brings all of its strategies under one roof and reflects where the firm’s office is headquartered in London, co-founder Saul Klein told Unquote.

The LocalGlobe fund has raised more than USD 150m and has a USD 200m hard-cap; Latitude has raised more than USD 110m, Klein said. The GP has institutionalised its Solar and Basecamp strategies for the first time, Klein said, adding that neither fund is focused on fund size or cheque size, but rather on building relationships with potential long-term investors that the VC has met over the past year.

“We’ve invested our own capital in the Basecamp strategy for the last 10 years and in Solar for the last two years,” Klein said. “But we are institutionalising these strategies now, and the four funds are not all in one black box with the same fees for all. They all have different returns expectations, too: with Solar we are aiming for 3x plus, Latitude 10x and above, and with LocalGlobe we are looking for fund returners.”

LocalGlobe, Latitude and Solar all have typical 10-year PE lifespans, Klein said.

Phoenix Court Group aims to invest in what the firm refers to as the “New Palo Alto”; namely, an area within a four-hour train journey of London. This includes cities such as Paris, Amsterdam, Brussels, Manchester, Leeds, Liverpool, Newcastle, Bristol, Oxford and Cambridge.

“We have operated in a previously really overlooked region,” Klein said. “We started Latitude as we could see companies breaking out at Series A/B stage and there was not enough capital for them, while the Solar strategy plays at the D/E crossover scale-up stage, where there is even less capital available in Europe relative to the US and Asia. The raw materials of founders, teams and companies are very strong, but the investors have not come to the table until the last few years. Many US and Canadian funds have set up here, and with investing in China becoming more difficult, our region has become a top-two geography.”

Phoenix Court Group has invested in 18 unicorns globally at seed level (second only to Accel and Sequoia), according to Dealroom data cited by Klein. The VC’s previous investments include used car marketplace Cazoo, digital banking platform Monzo, and overseas transfer platform Wise.

Alongside its latest fundraise, the firm is stepping up its work around its charitable foundation and impact. Phoenix Court Works sees the firm donate 10% of its management company profits and 2% of its carried interest, Klein said. “The foundation helps us with our mission, which is to be a good long-term neighbour in the Somers Town area between Euston and Kings Cross,” he told Unquote. “This area is now one of the most interesting from an innovation and growth perspective, but it’s also one of the poorest neighbourhoods in London. An adult male there will live 10 years less than an adult male in neighbouring Highgate, while 7/10 children there are on the radar of social care, and 5/10 are on free school meals. We are at a point where great returns without a positive impact are not sustainable.”

The foundation has invested in 23 projects to date, the VC said in a statement.

Investors
“Our fundraise is coming at a time where local and regional LPs have discovered the asset class, while non-local regional LPs who understood the asset class already are coming to understand this geography,” Klein said. “With Solar and Basecamp, we are operationalising the funds as we have seen a lot of interest from UK and regional LPs in the last six to 12 months, as well as from sophisticated Canadian and US investors.”

The VC’s LP base has developed significantly since its launch, Klein said. The firm had one UK-based LP in 2015, whereas 60% of its top LPs will be from the UK in its latest fundraise, he told Unquote.

“In total, 70% of the LP base are European,” he said. “60% of them are institutional investors who know who their beneficiaries are and take a long-term view, like insurance companies, pension funds and endowments. We have made a big effort to encourage more UK and European LPs to the asset class. One of the problems with the ecosystem is that it is light on capital, but when it does exist at the scale-up phase, only 20% of it is domestic.”

Investments
The LocalGlobe fund invests at seed stage and Series A/B, expecting to invest in 50 companies, Klein said. The LocalGlobe strategy made eight IPOs and its companies raised USD 9.4bn in follow-on capital in 2021, Klein said.

Latitude invests at Series D/E stage (around three years prior to an IPO) and expects to back 25-30 companies with tickets of USD 5m-10m, Klein told Unquote.

The Solar strategy will draw on the VC’s other strategies for its dealflow. “We have around 3,500 companies that we met at seed and pre-seed stage but didn’t invest in,” Klein said. “Sometimes we missed the opportunity, but we can look back at our notes on these companies and see what their deck was like at seed stage and invest in them later. 80% of the Solar investments will be from the pipelines of the other strategies.”

The Basecamp strategy is a VC fund-of-funds with 52 funds (20 from the US, 25 from Europe and the remainder from APAC and India) of USD 30m-50m in size; it expects to invest in 75-100 funds in total. “All of these funds are making distributions and are DPI positive, but we are not charging fees as the purpose is to generate structures and access to dealflow for us and for our LPs who often coinvest alongside the Latitude and Solar strategies,” Klein said.

Klein believes that the current market presents numerous opportunities, he told Unquote. “There is a great opportunity for corporates, asset owners and investors to get in at the bottom of the market at the moment as valuations have come down significantly and pricing is depressed, but the fundamentals have not changed much.”

People
Phoenix Court Group – Saul Klein (co-founder).

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