White Star holds USD 360m final close for Fund III

Harriet Matthews
26 October 2021

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Growth technology investor White Star Capital has held a final close for White Star Capital III on USD 360m.

The fund had a USD 300m target, which it exceeded. "We launched the fundraising last summer and it took around 12 months from first to final close," Eric Martineau-Fortin, co-founder and managing partner at White Star, told Unquote. "We ended up being oversubscribed and could have raised more, but the goal was not to change the strategy. USD 360m is the right size for a fund like ours that targets Series A and B. We want to build a tight portfolio of 16-18 companies in this fund, the same number as for our two previous ones."

Dentons, Collas Crill and Ferbrache & Farrell advised on the fund.

Although parts of the fundraise were done virtually, White Star was able to adapt to the circumstances, Martineau-Fortin told Unquote. "The world has evolved a lot as a result of the pandemic, we did have a number of meetings that would not have been possible normally that ended up being possible via Zoom and other similar platforms." The firm has also adapted its deal-making, he added. "We can now do deals without all of the partnership meeting with founders in person. It's been a bit easier for us due to our DNA; we effectively set up our firm via Zoom from the start in 2014."

Founded in 2014 by Eric Martineau-Fortin and Jean-Francois Marcoux, White Star Capital has offices in New York, London, Paris, Montreal, Tokyo, Toronto, Hong Kong, San Fransisco, Seoul, Guernsey and, most recently, Singapore. In addition to Martineau-Fontin and Macroux, the firm has nine general and venture partners.

The GP raised USD 70m for its first fund in 2015. White Star Capital II held a final close in June 2018 on USD 180m, surpassing its USD 150m target.

"Fund I is already fully returned, with a distribution to paid in (DPI) ratio of more than one, and it's on track for a total value to paid in (TVPI) multiple of 3x," Martineau-Fortin told Unquote. "Fund II's TVPI is close to 2.5x and in a good position to generate solid DPI following the Dialogue IPO in Canada."

The firm has raised more than USD 90m from co-investment funds, according to a statement. "Our tickets need to be the right size to create global leaders," Martineau-Fortin said. "We have been growing with the market and we create SPVs that can go further at later rounds. LPs have access to those future rounds, which creates a good opportunity for them to invest in fast-growing companies at a less risky stage without skewing negatively their returns in our fund. It also increases the cash velocity for these investors, especially when investing in pre-IPO rounds or pre-strategic exit ones."

The GP held a final close in May 2021 on USD 50m for its Digital Asset Fund. The vehicle makes initial investments of USD 500,000-2m, targeting early-stage companies from Series A onwards, focusing solely on crypto-networks and blockchain-enabled businesses.

In addition to the final close, White Star has announced the appointment of Patricia Barbizet as chairman of the board, Cristina Ventura as chief catalyst officer, and Alberto Lopez Toledo as chief technology officer.

Investors
Both new and existing LPs have backed the fund, including institutional investors and sovereign wealth funds in Canada, France, Germany, Guernsey, Japan, Monaco, Poland, South Korea, the UK and the US.

Two fifths of the fund's LPs are high-net-worth individuals and family offices, with around 20% sovereign wealth funds, 20% institutional investors, and 20% corporates.

LPs in White Star's funds include sovereign wealth funds from Guernsey, Monaco, Poland, France and Canada, as well as institutional investors such as Caisse de dépôt et placement du Québec (CDPQ), Kensington Capital Partners, Desjardins, Scotia Capital, Mizuho Securities, HarbourVest and Swen Capital Partners. Corporate investors including L'Oreal, Ubisoft, Lanxess and Beneva are also backing the fund, as well as family offices.

The fund had a 90% re-up rate, but White Star Capital expects that the LPs who could not commit to Fund III will be able to come back for Fund IV, Martineau-Fortin told Unquote. No LP has committed more than USD 20m, he added.

Entrepreneurs from White Star's current and previous portfolio companies have also backed the fund, including Kevin Glynn and David Nolan (co-founders and co-CEOs of Butternut Box) and Roger Hassan (former CEO of Echo and former COO of Tier Mobility).

"We did have some [entrepreneurs that we had backed] on board in our funds before, but not in a similar way to this one," Martineau-Fortin told Unquote. "We see our founders as partners and I think they see us the same way. We do not make control investments, so it's a different kind of dynamic and relationship compared to private-equity-type deals. Founders help us with many things, including sourcing, deal vetting and due diligence. Many of our founding team now have money or liquidity from exits, so we offer them to invest free of carry, so they invest almost as GPs in the fund, which creates a healthy collaborative dynamic where everyone feels that they are partners working together."

Investments
The fund invests initial tickets of USD 5m-20m, backing Series A rounds for companies in the US, Europe and Asia. The fund can provide up to USD 30m-35m for its most successful portfolio companies, Martineau-Fortin told Unquote. The fund expects to invest in 16-18 startups. White Star expects to deploy 40% of the fund in North America, 40% in Europe, and the rest in Asia, which is an area of expansion for the firm.

White Star backs companies in the technology sector, focusing on AI, digital health, fintech, foodtech, the future of work, industrial technologies, mobility and wellbeing.

"More than half of the fund is already deployed across more than 10 companies, as we have access to a tremendous amount of dealflow across our different geographies," Martineau-Fortin said. The fund has so far invested in companies in Canada, the US, Germany, France, the UK, Poland, Scandinavia, Singapore, South Korea and Hong Kong.

Among White Star's current portfolio companies is personal transport startup Tier Mobility, in which White Star owns a 10% stake via its second fund. The startup raised a USD 200m round led by Softbank and Mubadala Capital, as reported. Other recent investments include Numan, a digital health platform focusing on men's health.

"We have a fairly young portfolio, but have already generated more than 10 exits, including 2 IPOs," Martineau-Fortin said. "Although there might be a couple of exits arising from Fund I (Vintage 2014-2015) in the next 12 months, we usually invest alongside founders for an average of four to six years and this fund maturity is only at the end of 2024. As for our Fund II, all of our 18 companies are on a fast growth trajectory, which is quite motivating for our team."

People
White Star Capital – Eric Martineau-Fortin, Jean-Francois Marcoux (co-founders).