Finch Capital completes successful first close of EUR150m Europe III fund
Finch Capital has held the first close of its EUR150 million fund, Europe III, which will invest in European technology companies that shape the future of finance by using technology such as artificial intelligence.
Europe III saw a near 90 per cent follow on investment from previous funds. Since its inception in 2013, the firm has made a total of 40 investments across Europe and Asia and its assets now total USD400 million.
Finch's Fund II invested in both SE Asian and European startups. Both Fund I (EUR40 million, 2014 Vintage) and Fund II (EUR110 million, 2017 Vintage) are generating top quartile returns. The current portfolio includes a range of successful companies spanning Fintech, Regtech and Insurtech, and includes Trussle, Fourthline, Goodlord (which acquired Vouch), Grab, Hiber, BUX, Twisto, and Zopa; exits include Salviol and Cermati, with two exits in process.
With the new larger European fund, Finch Capital will invest EUR2-10 million at Series A and B stages, acquiring significant minority stakes in scale up companies with EUR2-5 million in revenues: a segment currently underserved by the European VC and Growth market that is facing a funding gap. As with its previous funds, Finch plans to back 15-20 European startups, targeting liquidity three-five years post investment, over the fund’s three year initial investment lifespan.
Radboud Vlaar, MD Finch Capital, says: “We have always been bullish on investing in Financial Technology. Moving forward, we are doubling down on Financial software, especially those companies that leverage AI to this end. We have seen the industry mature, giving rise now to a rich but fragmented landscape of robust businesses with EUR2-5 million in revenues. These are the companies we are focused on working with now. With the right support and management they have great risk/return outcomes and they are ready to build leading positions and consolidate the European market.”
The team’s hands-on, pragmatic approach supports portfolio companies with its deep networks and sector expertise across, for example: regional partnerships and M&A in Europe; a large network of Corporates and Financial Institutions to which portfolio companies can sell products; as well as hands-on experience in expanding internationally, especially in Asia. As active investors, Finch seeks 20-49 per cent ownership in its portfolio companies.
Rounding out its AI expertise, in early 2020, Finch Capital added venture partner Google and DeepMind alum Steve Crossan. He says: “Europe is ready to compete in the global enterprise tech arena, with more capital being deployed in AI/deeptech than any other industry - $20B last year alone. In the wake of general performance pressure, we see acceleration of the Finance sector in their tech understanding and adoption creating pressure for additional innovation in these areas.”
In 2020 the firm launched Flowrence, its proprietary Machine Learning AI tool, to support its deal flow and high quality deal sourcing. Over the last six months, 20 per cent of the firm’s shortlisted deals were sourced by Flowrence, especially helpful during a period of limited travel and in person meet ups.
In addition to the launch of Europe III, in 2020, the firm also launched a USD50 million Finch Capital SEA II for investments in SE Asia. Finch Capital SEA II will hold its first close in the coming months, having announced investment partnerships with Arise (Part of MDI) and a leading South East Asian Bank.