Creandum closes $300M fund for early-stage investments out of Europe

As one European VC raises a fund to double down on bigger growth rounds in Europe, another has closed a fund to continue focusing on early-stage investments. Stocklhom-founded Creandum, an early backer of companies like Spotify and iZettle, has closed a fifth fund €265 million ($300 million). The plan is to use the money to continue investing in European startups and startups with European founders (Creandum also has offices in San Francisco and Berlin) with a focus on seed and Series A rounds.

European venture capital has closely mirrored the trajectory that the startup ecosystem has taken in the region.

A strong culture of research in technical fields in public universities has meant no shortage of interesting ideas and talent to pursue them. But it was not that long ago that opportunities to raise capital to see those threads spun into cloth — much less fully-fledged items of clothing — were not so easy to come by. Funding rounds were smaller, and generally harder to raise, and if startups wanted to scale, the most promising of them often decamped to the US to do it.

Fast forward to today, and times are very different. The bigger startups in the region are staying put and finding the financial support — and customers — they need to take their businesses to the next level here in Europe, helped by the push into technologies like cloud services. And on the early-stage side, we’ve seen both the emergence of a new wave of VC firms, and an expansion of those that have been around for a while, to help fuel the explosion of startups that have formed and developed in the region.

Creandum, now 15 years old, fits into the latter category. Johan Brenner, a general partner at the firm, said that this round was oversubscribed with a view to seeing it add later-stage funding into the mix. Creandum, however, opted to reject that push to upsize to stay focused on seed and Series A.

“Creandum believes strongly that focusing on early stage is where the best returns are made,” he said in an email interview. “Being first institutional investors in Spotify, iZettle and Small Giant games and Creandum’s returns from those investments last year are proof points of that. Having too large funds will likely make the funds do larger and later investments or make too many small investments which is hard to support.”

He added that Creandum has already made a few investments out of this fund but is keeping mum on the details for now. “The investments in the new fund is still in stealth but they are in the areas of mobility, fintech, logistics and food tech,” he said. “We are excited to see the entrepreneurs that the fund is able to invest in.”

As is often the case with VCs, it often only takes a couple of huge hits to see a strong return — one reason why we see many built on the premise of multiple bets, to see what takes off (a model that SoftBank has taken, and with the vast coffers of the Vision Fund, now applies to making prolific later-stage investments). Creandum has followed a similar pattern and has had a strong run so far, helped in no small part by a few big hits. In its case they included the IPO of Spotify, the exit of iZettle to PayPal, Small Giant Games getting acquired by Zynga for $700 million, and the IPO of Elastic, which now has a market cap of $4.9 billion. The firm said that in total its portfolio exits have totalled $35 billion, with more than $800 million returned to investors in 2018.

In terms of areas and industries that are catching the firm’s attention, it’s a mark of the relative health of the market, I think, that Brenner declined to single out anything specific.

“Creandum is actually quite agnostic to the industry we focus on,” he said. “The most important thing is to find the best teams to invest in across Europe.” The firm estimates that 90% of GNP is “still largely undisrupted by technology.” That said, he added, “we continue to see opportunities in health tech, fintech, logistics, manufacturing technologies and mobility.”

Given the big swing of attention (if not, necessarily, usage) we’ve seen to cryptocurrency and blockchain architecture, it’s notable, too, that one of Europe’s bigger early-stage investors is looking at that as well.

“Creandum is a big believer in blockchain and the services and products it can enable,” Brenner said. “We also believe cryptocurrencies will be very important in the long term.”

Among other investments in crypto, the firm currently backs Argent, a decentralized wallet among that “fits into our thesis that the long-term potential of crypto is not about a few random people suddenly making a lot of money on a hot new ICO,” he said. “It is to profoundly change the world by making it more decentralised.” He said the firm is on the hunt for more startups in adjacent areas also looking for investment.