Earlybird Venture Capital Closes Fourth Fund At $200M, Total Capital Now At $800M
Earlybird Venture Capital has closed its fourth early stage fund at $200 million (€150 million).
Best known for providing capital to startups like Auctionata (which was started by an eBay (NASDAQ: EBAY) PowerSeller) and EyeEm (which recently secured $6 million), Earlybird Venture Capital is one of the most successful venture capital partnerships in Europe.
The company's total capital under management now stands at $800 million (€650 million).
"People used to think that innovation would be a victim of recession in Europe," Jason Whitmire, a partner at Earlybird Venture Capital, told Benzinga. "'Oh, what's gonna happen is, people are gonna run to all the established corporations and not startup companies.' The reverse has been happening. There's been an explosion of startups."
More and more European graduates are losing interest in the idea of working for big conglomerates like Siemens (NYSE: SI) and Daimler (OTC: DDAIF). Instead of joining an established firm, they are starting their own businesses and looking for employment at new companies that are bringing innovation to various industries.
Whitmire said that there are several reasons for this, including:
- It is much cheaper to start a company today than it was 10 years ago.
- Entrepreneurs now have immediate access to two billion Internet users.
- The ecosystem has evolved and can provide new businesses with the first $200k, $400k, $600k.
- In the past, entrepreneurs were forced to raise a few million dollars early on. That is no longer necessary.
Whitmire said that 80 percent of the entrepreneurs that Earlybird invests in are what he refers to as "repeat entrepreneurs."
"They've already been part of a management team that has exited, typically a startup company," he said. "These people are cycling their wealth and knowhow back into the ecosystem, and that's resulting in companies that are scaling much more quickly because these people typically know how to build companies more robustly."
That's not to say that Earlybird won't invest in passionate newcomers. On the contrary, Whitmire said that the firm has discovered several "very capable entrepreneurs" with big visions and deep product knowhow "that have not gone through the startup lifecycle to exit."
For those individuals, Whitmire said that Earlybird provides a lot of strategic coaching.
"No matter what, there are going to be great ups in the company and big downs in the company," he said. "As an investor you have to weather that and find ways to mitigate the bigger risks. For example, cash flow -- looking at their burn rate, just to make sure these guys don't run out of runway before we can raise a new round."
Inevitably, some companies will not make it past the startup realm. They may barely acquire customers, let alone turn a profit. That's just a part of the industry.
"These are young, volatile industries," said Whitmire. "The technology just doesn't work, sometimes the market comes too late, sometimes the founders themselves disintegrate.
"There's all these different pieces that can lead to that cataclysmic event. I think the most important thing is to try and see it on the horizon -- to already try and steer around it. Usually it's something that happens quarter after quarter. In measuring the metric you can start seeing this."
Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ
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