Market Overview

Earlybird Venture Capital Pours $100 Million into New Fund

The European venture capital firm is targeting a multitude of startups.

Namely "early-stage investments in disruptive global consumer and enterprise internet and technology businesses originating from Europe, with an emphasis on German-speaking countries," the company wrote in a press release today announcing the $100 million first close of its fourth Berlin-based venture fund.

"This is our fourth fund in 14 years of investing, averaging 3.5 years per fund-raise," Dr. Hendrik Brandis, Managing Partner at Earlybird Venture Capital, told Benzinga. "Our focus has always been Continental Europe, where we have fished for early stage tech deals from our pier in Germany."

Why Germany? "We believe Berlin has come of age as a startup powerhouse in Europe and a hotbed of innovation in areas ranging from social gaming to online music to enterprise/cloud models that typically can go global from day one," said Brandis. "We plan to double-down on the city and expect to increase the number of investments there. However, we will not lose sight the rest of Germany and Central Europe, where the entrepreneurial DNA has dramatically changed since we first began investing 14 years ago."

Earlybird, whose target fund size is $200 million, receives a few thousand opportunities per year. "But like most early-stage VCs, we only have [the] capacity to invest in 7 - 10 deals per year. So we tend to be highly selective."

Brandis said that the hit rate from the Earlybird partner network is typically high. "Referrals and repeat entrepreneurs represent the majority new investments, but we don't turn a blind eye to passionate newcomers," he said.

With regard to Earlybird's first fund, Brandis said that it was "almost 80% seed deals and included many software investments, as well as some we today would consider too capital intense; that vintage (1998) was the very best in Europe (driven by four IPOs and numerous trade sales)."

"Our second fund was 60% seed, 40% early stage, representing a spectrum of software, online and technology firms and is progressing relatively well despite the capital overhang from the first half of the 2000s," said Brandis. "Our third fund is 90% early stage, almost entirely focused on technology-enabled services, with portfolio realization underway now (two exits with several in the pipeline); we hope that fund will exceed the returns of all previous funds. We expect our fourth fund to operate in a favorable environment."

When it comes to finding a successful entrepreneur, Brandis said that he likes someone that's energized and has strong analytical skills," as well as having a good gut feeling and people leadership skills." But they don't necessarily need to be great managers, "if they can see and accept their limitations and therefore team up with good managers."

That said, Brandis warns against entrepreneurs who, in thinking they don't need to be a good manager, copy the Steve Jobs mentality. "You will never be a good entrepreneur if you start to copy others," Brandis warned. "Good entrepreneurs are like they are -­ they are driven and authentic and for sure they [are] not focused on the imitations of others."

Brandis also took a moment to dispel the rumor that every startup had to be, as the tech community puts it, "disruptive."

"At the end of the day it doesn't really matter if a company is disruptive or not," said Brandis. "What counts is the size of the opportunity, the lock-in and the speed with which the business can be scaled. However, the so-called disruptive models quite often show these characteristics. They serve broad actual or latent needs in a very different way and therefore create a new business segment."

Follow me @LouisBedigian

Posted-In: Earlybird Venture Capital Hendrik BrandisSuccess Stories Be Your Own Boss Tech Best of Benzinga

 

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