212.vc sets EUR 90m hard-cap for third fund

Erdinc Ergenc
09 November 2022

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212.vc, a Luxembourg-based venture capital firm focused on early-stage and growth technology investments, has set a hard-cap of up to EUR 90m for its third fund, partner Ali Karabey said.

212.vc Fund III has a EUR 70m target and expects to reach a first close by the end of Q1 2023 on EUR 30m-EUR 40m, Karabey said.

The firm finalised and started sharing the data room for the fundraise in September 2022, and the soft marketing was launched in July 2022, he noted. The formal launch will be by the first closing, Karabey added.

Domiciled in Luxembourg, the fund will have a lifespan of 10 years with a three-year extension.

The minimum subscription for individuals is EUR 1m, with EUR 3m for institutions. The GP commitment will be 2% of the fund size, Karabey said.

The management fees stand at 2.5%, capped at 18% in total committed capital, and the carry rate is 20% for the initial 4x and 30% thereafter, he added. The hurdle rate is equivalent to 1.25x.

AKD is providing legal advice on the fund, with United Trust providing fund administration services. Société Générale is acting as the fund's bank, with Mazars as the auditor, Karabey said.

LP base growth
The VC raised EUR 30m for its debut fund in 2012, while Fund III's predecessor vehicle was established in October 2018 and raised a total of EUR 49m. The European Investment Fund (EIF), Qatar Development Bank (QDB) and Turkey Development and Investment Bank (TKYB) were Fund II's lead investors, accompanied by a mix of institutional investors and family offices, Karabey said.

"Most of our Fund II LPs are family offices, high-net-worth individuals (HNWIs) and ex-founders," he said, adding that the firm now has more than 25 LPs. In terms of the amount of capital, funds-of-funds and Development Finance Institutions (DFI) have the highest percentage, he added.

The firm's existing Fund I and II LPs are mainly from Turkey and DFIs from Europe and MENA, Karabey noted. Existing LPs make up 40% of the fund's current LP base, he said, adding that most LPs have set up their own venture capital or corporate venture capital programmes.

Exceptional startups
The new fund will be targeting early-stage and growth-stage technology startups with a B2B focus, demonstrating clear product-market fit, solid traction, and an ability to grow globally with a sector-agnostic approach, according to Karabey.

The VC plans to use 70% of the fund for new investments and the balance for follow-ons.

"Fund III will be investing in Turkey, emerging Europe, and opportunistically in MENA. It will also look at opportunities in our diaspora network," Karabey noted, referring to the diaspora from Turkey, emerging Europe and MENA. Diaspora deals will include founders establishing companies abroad and setting up their back offices in their home countries, he noted.

Fund III will invest EUR 750,000 to EUR 7m per transaction, with an average ticket size of EUR 1.5m. The focus will primarily be on Series A, Karabey said, adding that the stakes it will acquire be between 5% and 20%.

The fund will conduct 18-20 investments over its five-year investment period and will syndicate its investments with other VCs.

The firm has a strong pipeline for Fund III and the VC sees an average of 50 companies per week, Karabey said, adding that around 70% of these are international. "We are always seeing exceptional startups/founders and could potentially make one more investment out of Fund II," he said.

Portfolio development
In addition to its first two flagship funds, 212.vc has also set up four SPVs. The companies in its two funds have a total asset value of more than USD 2bn, Karabey said.

Fund I backed 12 startups and exited one of them, with the remainder of the portfolio either no longer operating or being realised via small exits, he said.

"Winners" from Fund I include Turkey-based fintech Iyzico and Singapore-based SaaS company Insider, he said. The firm realised its investment in Iyzico through a full stake sale to PayU in June 2019 for a consideration of USD 164m, returning all of Fund I's invested capital, Karabey said. Insider, which received follow-on investments from global VCs like Sequoia, recently closed a USD 121m Series D round led by the Qatar Investment Authority, becoming the first Turkish B2B unicorn, he added.

According to Karabey, other active Fund I portfolio companies include Solvoyo, a Boston-USA based startup providing end-to-end supply chain planning and analytics platform with machine learning technology; and HotelRunner, a UK based SaaS start-up providing an accommodation distribution platform for hotels and travel agencies.

The investment period of Fund II is five years and it has so far invested in 16 companies with a total valuation of more than EUR 700m, he said. The fund has invested around 75% of its investable capital and the balance is reserved for follow-on investments, although it has made few of these so far, Karabey noted.

Among Fund II's portfolio is Marti, a Turkey-based micro-mobility company that offers a multi-modal fleet for riders, which is to be listed on the NYSE by the end of 2022, as per a previous report from Unquote sister publication Mergermarket.

Building the team
212.vc has a team of 11 people, including Karabey and fellow co-founder Numan Numan, who met in 2010 at the initial meeting of Galata Business Angels, the first angel network in Turkey. The founders set up 212 in the summer of 2010 after seeing the need and opportunity in the early-stage tech investment space in Turkey.

The fund and the team have a clear competitive advantage, Karabey argues, centered around their first movers' advantage as the first institutional VC to be established in Turkey, Karabey said.

The team has another partner, namely Maher Hakim, while Ezabel Nihmet acts as chief financial officer (CFO). The remainder of its team comprises further investment professionals, as well as marketing and finance associates.