VC fundraising enjoys strong 2020 vintage, sunny prospects

Earlier this year, Unquote reported on how Covid-19 had bolstered venture capital deal-doing in the biotechnology space. This appetite for life sciences investments – to say nothing of the continued flight to tech-centric businesses – has in turn boosted activity in the VC fundraising space: in 2020, 90 venture capital funds with a remit to invest in Europe reached a final close, raising $36.4bn in aggregate capital, more than double the $17.6bn collected in 2019 across 80 final closings, according to Unquote Data.

Among the largest closes recorded last year were Tiger Global XII, which raised $3.75bn, and KKR Next Generation Technology Growth Fund II, which collected $2.2bn.

In the first half of 2021, activity has remained strong across the venture capital space, with several large funds holding their final closes and often surpassing their initial targets. Notable closes have included Bain Capital Venture, which raised $1.3bn, and Digital Alpha Fund II, which closed on its $1bn hard-cap.

Notable 2021 VC fund closes

Vehicle	Fund Manager	Country	Amount raised (€m)
Digital Alpha Fund II	Digital Alpha	US	852
Bain Capital Venture Fund 2021	Bain Capital Europe	US	810
Balderton Growth Fund I	Balderton Capital	UK	563
Commonfund Venture Partners XIII (CVP XIII)	Commonfund Capital International Partners	US	517
83 North VI	83North	UK	456
Sofinnova Crossover Fund 1	Sofinnova Partners	France	445
Abingworth Bioventures VIII	Abingworth Management	UK	426
Ysios BioFund III	Ysios Capital Partners	Spain	216
Advent Life Sciences Fund III and Advent-Harrington Impact Fund	Advent Venture Partners	UK	184
Blue Horizon Ventures I	Blue Horizon Ventures	Switzerland	183

Source: Unquote Data

On a smaller scale, regional markets like Italy and Iberia were revitalised by the new trends that emerged during the pandemic and saw a flurry of launches and new vehicles closing. In Spain, Nauta Tech Invest V, which has a target of €155m, and Seaya Ventures III, which plans to collect €125m, held their first closes on €120m and €85m, respectively. More recently, Columbus Life Sciences Fund III closed on €120m and Ysios BioFund III on €216m.

In the meantime, in Italy, 360 Capital V held a €90m first close, while Primo Space Fund raised €58m and Eureka Fund I – Technology Transfer collected €51m.

"In countries like Italy, which for a long time has lingered at the periphery of the venture capital market, local and international LPs have become increasingly more open and responsive to funds and businesses operating across the startup ecosystem and the technology industry," says Stefano Peroncini, CEO of Eureka Venture. "In particular, investors have been interested in funds that have the expertise and knowhow required to focus on niche segments of the tech industry, such as deep-tech and biotech".

Across Europe, funds dedicated to a specific segment of the VC market have proven very successful during the pandemic, which has accelerated a shift towards specialisation that had already emerged globally.

"The strongest sectors across the VC market have been fintech and digital working, alongside life sciences and digital health," says Ian Connatty, managing director at British Patient Capital (BPC). "Funds focused on these segments have benefited from the new trends and priorities that emerged during the pandemic, and have continued to attract interest and capital from large pools of LPs."

That's life
The life sciences segment in particular has been thriving during the pandemic and has seen a burst of large fundraises, including the final closings of LSP 6 on $600m in March 2020 and Forbion V on €460m in December 2020. Furthermore, Advent Life Sciences closed two new funds with commitments totalling $215m; and Abingworth, an investment firm dedicated to life sciences, closed Bioventures VIII on $465m and Clinical Co-Development Fund 2 on $582m.

"The pandemic has shown to investors and fund managers the importance of developing innovative therapeutics that have the potential to significantly improve human health," says Tim Haines, chair and managing partner at Abingworth. "We have seen the sector booming, with a wide range of promising opportunities flourishing across Europe, and a large amount of capital pouring into the industry from institutional and private investors."

Despite their renewed interest in the VC space, LPs have also become more selective in their allocation, and more careful when evaluating a VC fund manager's activity and potential.

"From an LP's perspective, it has become very important to measure how resilient a GP can be in dealflow generation and dealflow management," says BPC's Connatty. "The pandemic has shaped a new way of doing business, which requires a different skill set and a different way of engaging with the market, while the interaction between limited and general partners has become more challenging but remains absolutely vital."

While the disruption caused by the pandemic is slowly starting to wane, the VC market has continued to pick up steam and is expected to flourish in the coming quarters. Several vehicles are wrapping up their fundraisings and are expected to reach a final close in the following weeks. Most recently, Unquote reported that DN Capital has so far raised more than €200m for its latest vehicle, Global Venture Capital V (GVC V), surpassing its initial target with a final close expected soon. Meanwhile, numerous VC houses are preparing the launch of new vehicles. One such example is Insight Venture Partners XII, which was registered in March 2021 and is understood to be targeting around $12bn.

"Despite the many challenges and disruptions of the pandemic, the venture capital market has progressed at a very fast pace and activity has been buoyant both on the deal and exit side," says Connatty. "In the coming months, we expect to continue seeing strong activity, especially from vehicles dedicated to investments across the life sciences and fintech sectors. Overall, it has been a very fast-moving picture, with the emergence and acceleration of new trends and strategies that have rapidly matured and become predominant. Both LPs and GPs will have to keep an eye on this fast-paced landscape to successfully navigate the post-Covid waters."

Notable European VC funds on the road

Vehicle	Fund manager	Country	Fund target (€m)	Launch date
Skymind I	Skymind Global Ventures	UK	713	Jan 2020
BioDiscovery 6	Andera Partners	France	450	Jan 2020
Azimut Demos I	Azimut Libera Impresa	Italy	350	Sep 2019
Hermes GPE Innovation Fund	Hermes GPE	UK	277	Dec 2019
Health for Life Capital II	Seventure (SPEF)	France	200	Jan 2019
Nauta Tech Invest V	Nauta Capital	Spain	155	Dec 2019
Northzone Conviction I	Northzone Ventures	US	152	Mar 2020
360 Capital V	360° Capital Partners	Italy	150	Sep 2019
Klima Energy Transition Fund	Alantra	Spain	150	May 2021
Kibo Ventures III	Kibo Ventures	Spain	100	Jul 2019

Source: Unquote Data

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