Northzone, the venture capital firm known for being the first investor in Spotify (SPOT), on Monday announced that it had raised a $500m (£390m) fund to invest in early stage startups.
The fund is the ninth that the firm has raised since it was founded in Sweden more than two decades ago, and will focus on the series A and series B stage, when startups raise early rounds of outside investment.
The $500m fund was “oversubscribed” and “raised at record speed”, Northzone said, “showing the strong global interest in the European early-stage venture capital market.”
In recent times, Northzone’s renown has been staked on savvy early investments in streaming giant Spotify, which listed on the New York Stock Exchange for $27bn, and fintech firm iZettle’s 2018 acquisition by PayPal for $2.2bn.
Northzone, which has offices in London, New York, Stockholm, and Oslo, said it would “double down on investing in early-stage innovative consumer and enterprise companies across Europe and the US East coast”.
The closing of the Northzone fund follows last week’s launch of a similar $400m (£311m) fund by rival venture capital firm Balderton Capital.
The number of series A rounds in Europe each year has quadrupled since 2012, while 2018 was a record year for venture capital funding in the region.
Depending on the frame of reference, the thriving venture capital scene in Europe is either a sign of a blossoming technology sector or evidence of an investment bubble.
“Maybe cyclically there's a little bit of an uptick, and maybe it will go down a bit,” Northzone partner Paul Murphy told Yahoo Finance UK.
“But, by and large, there is more opportunity out there. So we decided to lean in and be more bullish in the market,” he said, insisting that there had never been a better time to be a tech entrepreneur in Europe.
“Our view is that Europe is in a really amazing place.”
Murphy said that “almost all” of the limited partners who had invested in Northzone’s previous funds had invested in this fund.
Northzone expects to make around 25 early stage investments with the $500m fund, Murphy said, noting that, in the world of venture capital, the size of the fund was indicative of the firm’s strategy.
“When we sort of sat back, we said that, you know, we're really good at this early stage stuff. Let's keep doing that,” Murphy said.
Murphy pointed to the fact that almost all of Northzone’s investment team were previously entrepreneurs.
As for the companies in its portfolio that Northzone feels could be the next Spotify or iZettle, Murphy pointed to consumer review website Trustpilot, payment solutions provider Klarna, and peer-to-peer lending company Zopa.
“We feel really good about the ones that are probably the next batch,” Murphy said.
Northzone has already made five investments from the new fund, including two investment in an unannounced software startup.