DN Capital has launched a $350 million fund to help shape the post-Covid world. With people, and governments, anticipating a vaccine-enabled return to something like normality DN Capital’s Fund V is targeting those early-stage founders whose tech innovations will take advantage of the social changes the pandemic brought, and help economic recovery.
The UK VC firm has a long track record of funding successful ventures. Operating since 2000, they currently manage $950 million across their five funds, and have a track record of spotting the startups that go on to become market leaders. They were, for example, early backers of Shazam, first investing in 2004, and remaining with them until their acquisition by Apple in 2018. This year alone, they have seen four of their portfolio companies reach billion-dollar-plus valuations, while three others have closed billion-dollar finance rounds.
The VC firm’s latest fund will be led by co-founders Nenad Marovac and Steve Schlenker. The fund will focus on the areas that have been transformed by the accelerated adoption of digital during the pandemic, like software, fintech, digital marketplaces and consumer connectivity.
Overall digital transformation is one of the trends DN Capital are watching, Nenad Marovac DN Capital’s founder told UKTN, but especially the social changes it has brought. “The move to remote work and mixed work supports a lot of new services,” he said, “and more generally, tech can be used to level playing fields for SMEs and others.”
DN Capital believes that the world is only just starting to understand the impact and consequences of the pandemic. While attention has been focused on the medical implications of dealing with a virus, it means that the changes to society, the way we work, and our day-to-day behaviours have, perhaps, not been given enough consideration. But these changes will mean opportunities for those who are ready with products to take advantage of them.
The fund is intended to identify and support the founders with those products, said managing partner Steve Schlenker, “there are tech founders across the globe right now on critical missions to accelerate this recovery and help address the needs, and solve the biggest problems, of the post-COVID world.”
Diversity in recruitment
The role of venture capital is not just funding startups, but powering positive change is also part of DN Capital’s mission. As well as mentoring others in the VC industry, DN Capital is now looking to their founders to help promote diversity, Marovac told us, “all term sheets and legals now include requirements for diversity in recruitment, particularly for senior operating roles and board roles.”
The fund has ambitious goals, through its investments and founders, it is hoping to have an impact on the way the world is shaped after Covid. This, in part, is a reflection of the funds long-running confidence in its investments. Their long history of successfully identifying future unicorns is no accident. “When we say we only partner with the best, we mean it,” says Marovac. They follow a robust process of due diligence before investment and work with their portfolio afterwards: “We spend vast amounts of time with entrepreneurs understanding the market, their team, their product and to get to the heart of what they’re trying to achieve, long before we even talk about money. Then we work together with the entrepreneurs as partners to help them where they need it.”
Although London-based, the fund has a ‘think big and global’ approach, which is reflected in its investment approach. Around two-thirds of its investments are in the European tech scene, managed out of its London and Berlin offices. The remaining third going through their Menlo Park office in Silicon Valley. These have provided some of their biggest investments. Its first billion-dollar exit was US-based eCommerce search platform Endeca, which was sold to Oracle. More recently, Auto1, a wholesale platform for used cars, was recently floated on the German stock exchange with a valuation of over $10 billion.
And, for those founders who might be hoping for a share of the investment from DN Capital, Marovac shared the factors they need to keep in mind. “First, it’s a global market, they shouldn’t just be local players. Second, they need a detailed understanding of unit economics, both short and long term,” he said. And the third? That might be most important, given the experience DN Capital can bring: “A willingness to take advice.”