Moonfire Ventures raises USD 115m to back early-stage startups in Europe

It has raised USD 90m for Fund II and will deploy its capital in new investments, plus a further USD 25m to further support winners in its portfolio via its USD 25m Opportunity Fund, according to a statement.

The firm's USD 60m Fund I, which closed in May 2021, is now fully deployed, Managing Partner Mattias Ljungman told Unquote, noting that the firm usually reserves 40% to 50% for follow-on rounds.
In total, the firm has led 23 deals and has co-invested in 27 deals alongside investors such as Sequoia, Accel, Index, and General Catalyst, it said in a statement.

The firm is looking to double down its origination and investment approach, which is now further fuelled by the takeoff of AI. Paired with human intelligence, Moonfire uses proprietary machine learning models and software across the VC value chain to make informed investment decisions faster and to help portfolio companies accelerate growth.

The firm registered both its second and opportunity funds in February 2022, according to Unquote Data, and its latest fundraise "went fairly quickly," said Ljungman. Final commitments for the vehicles were secured at the end of 2022, he said, noting that investor sentiment started to change in H2 2022 amid the challenging macro environment, with low public markets valuations and pressure on LPs due to the denominator effect.

"We had a lot of interest from our current investors but at about the second half of last year, it was clear that LPs were a lot more careful," he said.

Since its launch in 2020, Moonfire is currently operating with a seven-member team and is looking to grow by making a few more hires, while seeking to remain a small team, he said. Joining Ljungman and partner Mike Arpaia, a computer scientist focused on AI and quantitative finance, is a team of entrepreneurs and technologists, 90% of whom have founded and scaled companies themselves, the firm said in a statement.

Investors
The firm saw a 95% re-up rate for its latest fundraise, Ljungman said. Its LPs base is largely comprised of European investors, but it has received commitments from a few US institutional investors as well, he said.

The fund's investors are mostly institutional players, including funds-of-fund and big family offices.

"We are backed by people who really understand the sector and are really betting on Europe and the early stage and seed space," he said.

Investments
Fund II will invest USD 1.5m-USD 2m per deal for stakes of around 10%-15%, Ljungman told Unquote. This is slightly more than the average ticket size of less that USD 2m that it deployed with its first fund, he added.

Moonfire is set to deploy its latest vehicles over the next two and a half to three years, he said. It plans to invest in 40 to 45 start-ups in total by completing seven to 10 early-stage and seed investments per year. So far in 2023, it has completed three deals and seeks to add about four more start-ups in its portfolio by year-end, he added.

It is on the lookout for startups in Europe, with a focus on the UK, Nordics, France and Germany, he said. It now reviews up to 50,000 companies every week – more than 600 times the average of a traditional VC – in search of founding teams in Europe using tools including AI, Web3, and AR/VR to transform four key sectors: health, work, finance and gaming, said the statement. All these areas are expected to be affected by disruptors and new technologies, such as AI, said Ljungman.

"Gaming is going to be changing quite dramatically with AI, with content creation, but also the ability to create new dynamics, which is going to be quite exciting and more fun and social," he said.

Health and wellbeing start-ups, such as its portfolio company Oliva, a UK- and Spain-based mental health services provider, could also be enhanced by AI and algorithmic predictive elements, he said. AI can optimise and strengthen interactions among users and therapists, he added. Moonfire is therefore keen to direct its start-ups in the right direction by monitoring upcoming trends and technology applications that can help a business scale.

Since its launch, Fund II has completed about seven transactions that are yet to be announced, mostly across its gaming and future of work investment themes. It has sourced investments including UK fintech LiveFlow through its AI engine, the firm said in a statement.

Companies from the firm's debut fund that have raised follow-on funding include automated payroll portfolio company Humaans, which recently raised a USD 15m Series A round; open source business intelligence platform Lightdash, which has completed a USD 7m round led by Accel; and game studio GOALS, which closed a USD 20m Series A round with VC backer Seven Seven Six.

As an early stage investor, portfolio exits "are not on the cards yet" although there has been interest from potential buyers, he said. At the moment, the firm is focused on driving growth across its start-ups, while being conscious of the "deliberate approach and thoughtful process" a sale process requires in the current market, he added.

People − Mattias Ljungman (managing partner).

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