Shazam investor DN Capital has raised €200 million for its new fund
Shona Ghosh
Updated
DN Capital Nenad Marovac
Anthony Harvey/Getty
Shazam and Purplebricks investor DN Capital has raised €200 million for its fourth fund, targeted at early stage startups in the UK, Western Europe, and the US.
Like rival fund Balderton Capital, DN Capital has bucked a post-Brexit trend and secured funding from the European Investment Fund.
CEO Nenad Marovac believes post-Brexit uncertainty is bad for the tech sector and thinks it will probably discourage talent from coming to the UK.
London-based venture capital firm DN Capital has raised €200 million (£175 million, $248 million) for its fourth investment fund, targeted at early-stage startups.
The fund is DN Capital's biggest to date, with money from a mix of institutional investors, family offices, and high net worth individuals. Europe's fund-of-funds, the European Investment Fund, has also invested.
DN Capital is one of the most established venture firms in Europe, founded in 2000 by current managing partners Nenad Marovac and Steve Schlenker. It has funded firms such as music recognition company Shazam, acquired by Apple for a reported $400 million (£281 million), online estate agents Purplebricks, and used car marketplace Auto1.
Two-thirds of the new fund will be targeted at startups in Western Europe, with the rest going to US companies.
"The UK is a super thriving market, with great entrepreneurs, amazing academic institutions that are pumping out great technologies in artificial intelligence and in biosciences," he told Business Insider. "It's 10 out of 10. With Brexit, I don't know how that will affect things in terms of the UK as a market. It's currently the number one market in Europe, but it's neck-and-neck with Berlin. We think Berlin is right up there."
DN Capital invests heavily in Berlin startups, with Marovac spending 50% of his time there.
The single biggest concern for the sector, according to partner Thomas Rubens, is talent. "It's the simple nature of feeling welcome. Cities like Berlin and Paris are trying to attract [tech] talent, but the message from London was 'Please don't join us.'"
Marovac echoed existing concerns that it will be difficult for smaller, UK-focused funds to raise money from Europe.
"[Brexit] will make it very complicated for VC firms raising money on the continent. People will have to set up a European structure — it's very expensive if you're small."
DN Capital is willing to replace founding teams to make startups succeed
DN Capital can boast a number of successful exits and follow-ons aside from Shazam. Purplebricks went public in late 2015, while Auto1 raised €460 million (£401 million) from Softbank. Marovac said DN Capital's "active approach" differentiated the firm from other investors.
"We're one of the most active guys in our portfolio companies. Take an example like Shazam. When we came in there ... everyone was focused on the B2B side of the business," Marovac said, referencing a time when Shazam would track which songs were going viral for radio stations. "That was the main business. Then I helped put in Andrew Fisher as CEO, and I brought in [ex-CFO] Keith Lovell and [former marketing lead] Stuart Patterson."
Not everyone appreciates the hands-on approach. One former founder of a DN Capital-financed startup, who preferred to stay anonymous, told Business Insider they resented losing control of their own company.
Asked how founders felt about the active involvement, Marovac said: "At least their company's alive. We don't do that unless we have to. Our best returns have always been with the founders going all the way through."
Marovac said the firm had another advantage because it's willing to invest so early, pointing to Auto1 and Purplebricks. DN Capital led Auto1's Series A round in 2013, and invested again in the recent round led by Softbank.
Marovac said: "Between Series A and Series B, it grew at 5X. It's very unlikely we would have won that second round."
There was a similar pattern with Purplebricks, which first raised initial funding from DN Capital, then a Series A round that included star investor Neil Woodford. "We had to fight off Woodford."
DN Capital currently lacks women at partner-level on its investment team, and its listed panel of industry advisors is entirely male.
Marovac defended the firm's record on hiring women, pointing to former DN Capital staffers such as Northzone principal Marta Sjögren, and Ventech Capital principal Audrey Soussan. He added that DN Capital also supports Diversity VC and Level20, an initiative to get more women into private equity. "Wherever we can we're pushing for that, within limits," he said. "We don't want quotas."
He added: "Everyone's working on it. I think the other thing, in terms of diversity, it's not just gender, it's also nationality and race. If you look at DN, we are definitely not the all-white male Oxbridge crowd — we've got a Croatian migrant, people from everywhere on the team. I would definitely not say we have any issues there."
