An investor in iZettle and Wonga just raised $235 million to fund the next fintech unicorns

iZettleJacob de Greer, CEO of Dawn portfolio startup iZettle.
  • UK venture capital investor Dawn Capital has raised $US235 million (£165 million) for its third fund.
  • The early-stage investor has managed to return 3.3 times its first fund to its investors thanks to a strategy of backing under-the-radar fintech and subscription software firms.
  • It has backed Wonga, iZettle, and cybersecurity firm Mimecast which went public in 2015.
  • Dawn also raised money from the European Investment Fund, an important source of VC funding, which industry insiders thought might dry up after Brexit.

An early-stage venture capital firm, which backed Wonga and payments startup iZettle, has raised $US235 million (£165 million) for its third fund.

Dawn Capital invests primarily in financial and enterprise startups. Its portfolio includes cybersecurity firm Mimecast, which went public in 2015 and has a current valuation of $US2.16 billion (£1.5 billion), and Swedish graph database firm Neo4j, which helped journalists examine the Panama Papers.

Haakon Overli, a general partner at Dawn, said the fund was oversubscribed thanks to investor interest in Europe. Dawn invests about half its money into UK startups, and the remainder across continental Europe.

He said Dawn’s first fund had so far returned 3.3 times the amount of money originally invested, a strong return for a European fund. He estimated a similar return for its second fund. That’s thanks to strong performers such as Mimecast, iZettle, and data governance firm Collibra.

“[Investors] were feeling the opportunities in Europe are greater than ever, the rounds are getting a little bit bigger, and our performance in the past supported deploying a bit more capital,” he said.

Investors also liked Dawn’s willingness to back what some might see as unsexy firms which generate good returns, like Mimecast.

“Things that appear niche are where we have done well,” Overli said. “They are things where the subject matter may not be the most exciting, but the output is very valuable.”

The firm will continue its focus on software-as-a-subscription businesses for the third fund.

A big source of European venture funding is back in business after Brexit

Almost a third of Dawn’s new funding comes from the European Investment Fund (EIF).

This is a big deal given that venture capital investors worried last summer that the fund had pulled out of the UK following Brexit.

The EIF is what’s known as an “anchor” investor, which means it will commit fairly early to a new venture capital fund. This encourages other, smaller investors to come on board and makes it easier to close the fund.

The EIF has handed around £2 billion to UK investors to date, and its commitment to Dawn suggests it’s again willing to invest in UK funds that put money into European startups. The EIF is funded by the European Investment Bank, whose shareholders are the EU’s 28 member states, including the UK.

“After Brexit, [the EIF] needed time to figure what the new world looked like,” Overli said. “They said ‘We want to back funds with a European strategy that do well, and you’re one of them.”

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