Swedish E-Commerce Pioneer Is Said to Plan Doubling Its Capital

(Bloomberg) -- A Swedish private-equity firm co-founded by e-commerce pioneer Patrik Hedelin plans to more than double its capital with a new fund, according to people familiar with the process.

eEquity aims to raise 1.5 billion kronor ($183 million) for its fourth fund, said the people, who declined to be identified as the information is not yet public. The Stockholm-based firm plans to close the capital raising by the summer, they said. Representatives for eEquity declined to comment on the plans.

The firm targets companies with business models focused on e-commerce. It mainly looks at the Nordic region and currently has 17 investments. eEquity’s three existing funds manage about 1.4 billion kronor together, with the latest having an internal rate of return of 39 percent at the end of 2017.

Partner and co-founder Hedelin says investors have yet to fully grasp the sheer magnitude of changes that online shopping will bring to the retail industry.

In Sweden, “some 60 billion kronor in sales have moved online in the past 10 years, and if growth continues at the same pace, another 180 billion kronor will shift from offline in the coming 10 years," Hedelin said in an interview. “If you don’t have a digital strategy, it will be hard to survive."

Hedelin built a reputation as a pioneer in e-commerce after advising online book store Bokus.com in the 1990s. He also co-founded the fashion retailer Boo.com, which went bust when the dotcom bubble burst at the turn of the century.

eEquity targets companies with between 50 million kronor and 200 million kronor in revenue, with a goal of making somewhere between 3.5 and 5 times its original investment. It steers clear of startups with a long way to profitability.

“We don’t like to rely on being lucky,” Hedelin said.

To boost sales and make its targets more profitable, eEquity tends to add products, geographic markets and introduce own brands. It also uses so-called social media influencers for marketing purposes.

"That means we can build the companies with higher growth and keep them more scalable, while still being profitable,” Hedelin said.

Swedish E-Commerce Pioneer Is Said to Plan Doubling Its Capital

eEquity’s funds have a lifespan of 10 years, and its typical investment horizon in individual companies is five to six years. Its investors include the European Investment Fund, family offices with a retail connection and institutions.

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