Europe Gets Another Giant VC Fund to Keep U.S. Investors at Bay

(Bloomberg) -- The venture capital firm that’s backed cyber-security startup Malwarebytes Inc. and file-hosting service WeTransfer has raised a 463 million-euro ($541 million) fund to invest in "growth-stage" European technology companies.

London-based Highland Europe has previously also invested in video-game developers, e-commerce platforms, and companies producing software for industrial businesses.

Fergal Mullen, the firm’s managing partner, said Highland defines its target companies as those generating at least 10 million euros in sales per year, with an annual growth rate of at least 50 percent.

The announcement comes at a time when European venture capitalists have been raising increasingly large funds to compete with deep-pocketed backers from the U.S. and China, who are looking overseas for investment opportunities.

Mullen said Highland intends for the fund to finance 15 to 17 investments 10 million euros to 40 million euros each. Historically the firm has invested about 75 percent of its funds in the U.K., Germany and France, but Mullen said the new capital will be deployed across Europe wherever Highland finds the best companies.

He said the firm had initially planned to raise 400 million euros, but investor demand pushed the figure to 450 million euros. Highland’s general partners have contributed an additional 13 million euros of their own money.

Despite the growing investor interest in European startups and the increasing size of investment rounds, Mullen said he did not see a bubble in European tech. "We are not seeing a worrying upward trend on value at this point in time," he said.

Backers of Highland’s new investment vehicle include large pension funds, university endowments, philanthropic foundations and family offices, but Mullen wouldn’t name specific investors, citing confidentiality agreements. He said about two-thirds of the backers were from Europe and about one-third from the U.S. Most, but not all, had invested in the company’s previous funds, he said.

The firm’s total assets under management now total 1.1 billion euros, Highland said in a statement. It’s sold stakes in game developer SocialPoint, fashion e-commerce company MatchesFashion.com and waste industry software provider AMCS Group in the past 18 months.

Mullen said Highland Europe, which is affiliated with U.S.-based Highland Capital Partners, remains "all about the founder."

"They are the rock stars," he said. "We’re just the roadies."

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