DN Capital launches USD350m tech fund to shape post-pandemic world

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Steve Schlenker, DN Capital

Venture capital firm DN Capital has announced the launch of its latest USD350 million fund, focusing on early-stage founders developing tech to boost the global post-Covid recovery.

In an unprecedented global economic environment, the firm’s fifth fund will back early stage entrepreneurs across Europe, the UK and the US who are looking to create businesses built on the pandemic-accelerated surge in digital adoption, and developing tech critical to the global recovery.  

Founded in 2000 by Nenad Marovac and Steve Schlenker, DN Capital now manages USD950 million across five funds. The firm has a track record of partnering with some of Europe’s most promising startups – its portfolio includes the likes of Auto1, Shazam, happn, Hopin, GoStudent, Jobandtalent, and Hometogo.

“We’re looking for entrepreneurs who are trying to change the paradigm from offline to online; trying to find markets that have historically not benefited from technology where you can apply technology and create really disruptive change,” Steve Schlenker (pictured), co-founder and managing partner of DN Capital.  
 
Known for their ‘Think Big and Global’ approach to startup investing, the firm was one of Shazam’s earliest backers in 2004, and helped guide the London-born app through to Apple’s acquisition in 2018.

DN Capital’s first billion-dollar exit was Endeca which was sold to Oracle for USD1.1 billion in 2011. In its current portfolio US remittance business Remitly, digital staffing company Jobandtalent and the online education company GoStudent are amongst the latest unicorns and have all recently closed billion-dollar financing rounds.

Prior to the GoStudent investment, Schlenker noticed how Europe's online education lagged Asia. “We found an entrepreneur who was very passionate and had insights into how to create a platform to help anyone become a tutor and it hit the market at the right time. We co-led the series A; within a year it was up tenfold and the business had grown from 20 million to a 1.4bn valuation.”

“It’s about finding founders who take sectors that have lagged in digital transformation, apply technology and transform the sectors,” he explained.
 
Shaping financial inclusion

Fund V will double-down on DN Capital’s strategy of finding global category leaders in its core fields of software, fintech, marketplaces and the consumer internet. Roughly two thirds of the firm’s investments have been made in Europe, through its London and Berlin hubs, with the remainder originating in its Silicon Valley office in Menlo Park.
 
A big theme for DN is financial inclusion, according to Schlenker. “I think what we’ve seen coming out of the pandemic is the divergence of wealth between those who were hit very hard by the lockdowns and the change in the economy as a result of the pandemic, and those who were able to thrive during that time. So we focus on, as one of our core themes, how do you level the playing field? How do you use technology to identify people who don’t have access to credit, don’t have access to capital, who are underrepresented, with people who deserve to have more access and provide them with that access,” he commented.

Post-Covid digital shift

“One of the things this pandemic did was accelerate the shift to digital. Things are already happening in technology, so it just accelerated everything,” said Nenad Marovac, co-founder of DN Capital.

Within DN’s four pillars software, fintech, marketplaces and consumer internet, the five biggest trends as a result of Covid the firm is looking at are: software automation, digital payments, e-commerce enablement, digital communications, and digital health.

DN Capital invests in Europe, where 75 percent of their deals are sourced, including the UK, while around 25 percent are with tech startups in the US and Silicon Valley.

“Within Europe our most important market is Germany. Berlin is a market we were early into as we built a position with Auto1, Mr SPEX, HomeToGo etcetera, so we have a deep track record in Berlin,” commented Nenad.

“New markets we really like are Spain, where we’ve invested in JobTalent. That company could be worth five to ten billion over time. Eastern Europe as well; and Sweden, Denmark, the Nordics. We like Helsinki a lot. We’re going to put more resources there as well. The UK is great, we’ll continue to invest there but it’s very crowded,” he added.

Schlenker: Our US strategy is finding companies where we’re the only European investor. We play an important role in helping European companies get access to the US. That helps us win deals in Europe, but also helps the companies in finding new markets, new executives and becoming global leaders.”

Having seen the movie before

The founders of DN Capital’s best advice for growing a company is to hire the best people possible. “We like CEOs or founders that are confident in themselves to hire amazing people that might even be better than them for every role within the firm,” he explained.

“Second, we like fast growth, but we prefer sensible fast growth. We don’t want people to just blow all of their money in the first three months. We want to make sure they are spending and growing fast, but also in a way that has good unit economics, so that when they raise the next round it’s not going to be impossible because they just blew their brains out. So I’d say hire the best people, be aggressive but also prudent with capital.”

DN Capital also wants companies to become leaders in their first market, before they expand into other markets. “If you're a German company we want to see you own Germany, before you start building into France, the UK and all over. The worst thing you can do is open up in London, then Paris and then you burn your cash super quick. Being market leader in your home market is really important for us, and then you can expand internationally,” said Nenad.

Schlenker agreed and added: “In fact a lot of young companies want to expand just for the sake of expanding, and occasionally we also find entrepreneurs who aren’t aggressive enough for expansion, so it’s tricky to find that right balance. That’s where expertise, experience and having seen the movie play before, like DN has, helps the entrepreneur.”