VC Profile: RTP Global gears up to deploy largest fund to date, remains bullish on breakout opportunities

After doubling the size of its ready-to-deploy capital in its latest fundraise, the firm is confident about the breakout opportunities its latest fund's portfolio will present, referring to startups with rapid revenue ramps.

The firm is seeing a great amount of innovation across all the geographies and sectors it invests in and will start investing from Fund IV in the coming months, said Jefferies.

Its USD 1bn fund will deploy USD 660m for early-stage investments and USD 340m to provide ongoing support to ‘breakout' portfolio companies.

"Our flexible capital structure and ability to invest from a startup's early days and throughout its lifecycle is particularly suitable in the current market, where founders need long term partners," he said.

Fund IV's capital derives almost entirely from the reinvestment of proceeds from RTP Global's previous investments, with the main pool for the fund's capital originating from its Fund I investment in New York City-headquartered monitoring and security platform for cloud applications Datadog [NASDAQ:DDG], which went public in 2019, raising USD 648m.

"The fundraising process was for us, given the market conditions, in some respects exceptionally easy, because we are nearly exclusively reinvesting the proceeds of our previous investments. But at the same time, it was exceptionally difficult because it's very difficult to identify and hold startups with strong potential," he said.

Targeting tech hubs

The new fund will be deployed across North America, Europe, India and Southeast Asia and the firm seeks to make about 20 investments per region.

RTP Global's sweet spot is at Series A, occasionally making some seed and Series B deals, an investment area with a lot of upside but also high risk, he said.

In Europe, the firm is focused on the UK, Germany and France, alongside "less traditional" tech hubs, such as in Eastern Europe and the Baltics. Moreover, Barcelona, Lisbon, Amsterdam and Italy are present interesting opportunities, emerging as up and coming ecosystems, added Jefferies.

Past success stories include listed Germany-based online food ordering service Delivery Hero [ETR:DHER], as well as UK-based merchants payments and financial services provider SumUp.

Historically, the firm has been active in fintech and expects to continue to support businesses in this market, which will continue to grow, he said. Application software for businesses, some infrastructure deals, as well as media and consumer, will also make up Fund IV's portfolio.

With its 2020-vintage Fund III fully deployed the firm has already used some of the 60% it had reserved for follow-on rounds. Fund IV will largely follow the same allocation strategy in terms of initial investments versus reserves.

Long-term support

The firm expects its strategy of reinvesting proceeds from previous investments to resonate well with founders, particularly in the current environment where capital is becoming increasingly scarce.

"We're minority shareholders in businesses and we try to be very aligned with the founders and in the way our fund is set up, that comes more naturally to us than it does to most funds," said Jefferies. "Especially in the market that we're in at the moment and the market that we'll likely be in over the next three to five years across all stages, that will be a very valuable value proposition to the founders who are really trying to build global category leaders."

The firm expects that it will be investing between USD 50m-USD 100m in the top three companies from RTP IV over the course of their lifecycle, he said.

Looking ahead, with most of its portfolio well-capitalised, the firm could consider the IPO route for some of its portfolio companies when the public markets pick up, while its scaling businesses can continue as private companies until then, he added.

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