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Berlin’s VC Earlybird steps up with €150m fund – poised for more Series B deals

Ciaran O'Leary

Ciaran O'Leary

Berlin-headquartered tech investor Earlybird is heading towards more later-stage deals and greater geographic diversity with the final close of its most recent venture capital fund, Earlybird V, at just over €150m ($200m).

The fund, earmarked for early-stage companies in Europe with a particular focus so far on Berlin, including deals with EyeEm, AuctionataTHE Football App and Versus, made a first close at about $100m 15 months ago. Today's final close is almost bang-on the firm's target for the fund.

So far, Earlybird has made about 10 deals from the new fund and expects to continue that rate over the next one to two years (see graphic below for a detailed breakdown of deals sizes, stages and sectors).

Earlybird IV July 2013

With a bit of extra capital under its belt, the firm will now be able to make more Series B investments, with a technical upper limit of 10 per cent of the fund or €15m.

"We've decided it's a very attractive part of the market that we want to fill," Earlybird partner Ciaran O'Leary (pictured above) said today. "Having said that, growth always starts in our definition when we start investing €5-7m as part of a round, so I don't see us doing too many investments where we start off with €10m or €15m."

Seven out of the ten deals so far are in Berlin. Is the fund's reliance on a single relatively early-stage tech hub a risk? "Absolutely, that risk is there", O'Leary said. "Having said that, we have done one investment in Stockholm, one in Paris, one in Frankfurt. The next investments we're looking at – only one is in Berlin. The others are in towns you wouldn't have heard of across Germany."

[contentad keyword= "left"] It's hard to pinpoint where exactly Earlybird's sweet spot lies, with deals running from ad tech to the latest social messaging mobile app and now from seed through to Series B. The unifying factor, according to O'Leary, is highly scalable web businesses:

"We don't care if it's enterprise – even clean tech if it's software-based and highly scalable – or hardcore consumer. What we care about is that you're building a product that creates critical infrastructure for the market you're serving," he said, adding that the firm's sweet spot is still "definitely Series A".

Early days for the Berlin wave

It's still early days for the current wave of Berlin tech startups, especially those in the grassroots movement led by companies such as SoundCloud and ResearchGate and including several Earlybird portfolio companies. If it follows industry standard, the firm will have a few more years to make deals from the latest fund and about a decade before it needs to do the final number-crunch on its returns.

O'Leary is bullish that more than a few of this cohort will pull-through by then. "The thing is – in our experience and everyone is a prisoner of their own experience – the more disruptive things take a bit longer but in the long-term yield much bigger outcomes."

Image credit: Ciaran O'Leary: NEXT Berlin


Earlybird closes $100 million fund focused on Berlin

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