The second fund is a make-or-break moment for a venture capital business. Because you don’t have a track record or a return on investment to demonstrate that you’re a good investor, you raise money with the inaugural fund based on an investing thesis. When it comes time to raise the second fund, things change.
Additionally, Raffi Kamber and Jérémy Uzan’s Paris-based venture capital firm Singular has two pieces of information to share. First, Singular managed to raise €400 million for its second fund after raising €225 million for its first fund ($245 million at today’s currency rate). Second, all of the investors from the first fund have returned as limited partners in the second fund, which is a positive indicator.
This was not an apparent consequence for the VC company, since venture capital has been a wild ride over the last two or three years. After the investment craze of 2021 and early 2022, which resulted in ridiculous values, things have come crashing down in a big way.
European companies are on pace to raise $45 billion this year, according to Atomico’s state of European tech report. European startups will have raised $85 billion by 2022.
“There were a lot of companies raising funds in fairly short cycles at the upper end of what they could raise.” As a result, the average check had increased statistically, and the speed of deployment had somewhat quickened,” Jérémy Uzan said.
“So we found ourselves in a situation where we had to decide what we were going to do.” Do we participate or do we remain silent? Should we play or not? . . . “Of course, we chose to play this game after consulting with our LPs,” he continued.
Many firms are now raising rounds with flat or even lower valuations than their last round. What effect did it have on Singular’s performance? The business is not disclosing any financial performance metrics for its initial fund. “It’s good,” stated Uzan.
He also said that current LPs have re-invested in the second fund. And the ramifications of the VC investment frenzy were obvious. It meant that Singular needed to raise its second capital faster.
Singular’s Fund was established with the help of substantial investors such as pension funds, sovereign funds, and huge family offices. Most of them handle at least $10 billion in assets and are headquartered all over the globe, from the United States to Singapore.
Creating a large European venture capital fund
Unlike many Paris-based venture capital companies, Singular has been investing in European entrepreneurs since its inception. In many aspects, Singular is attempting to develop a Tier 1 venture capital company that can compete with Index Ventures, Accel, Balderton, Atomico, EQT, and others.
“There are lots of small funds springing up, very often built around individuals, either with a solo GP approach or a seed fund approach with a particular vertical or focused on a particular geography,” he added. “But as a generalist VC firm on a European scale, with no vertical, no geography, just competing with the few brand names that naturally come to mind, I’m not sure if there were many new ones.”
Blossom Capital and Felix Capital are two recent entrants with this kind of opportunistic venture investing scope, according to him. However, he finds it difficult to provide an example of a French venture capital business.
Many French venture capital companies continue to prioritize France, with a few European investments thrown in for good measure. France is home to around one-third of Singular’s portfolio firms. However, the bulk of them are dispersed throughout numerous European nations.
Singular invests in Series A and subsequent rounds. “Because we have deep pockets, we can do a Series A where you need a big check to get in.” But, at the same time, we don’t rule out funding very, very strong startups at an early stage,” Uzan said. “And we have nothing against Series B rounds when we feel there’s still plenty of potential upside.”
The cancer care software business is one of Singular’s portfolio companies that I’ve previously reported on Eltrys. Corporate mental health service, resilience moka.care, is a platform for data monitoring. Soda is a business that provides automatic accounting for freelancers. Social stock trading app Indy Carbon fiber composite material firm Fairmat is a company that provides real-time analytics APIs. Tinybird is a new life insurance business. Life5, business software for the hotel sector, Thynk, and Osium AI, an AI-based R&D firm focusing on materials science.
As you can see, there are a diverse range of sectors and verticals. Except for the financial possibility, there is no obvious link between these firms.
“We still have this approach—a bit of a cliché, but it’s true—of looking for the best teams.” “We believe the teams will lead us to high-potential projects,” Uzan added.
And, if they identify an investment opportunity, Singular aims to lead as many rounds as possible in order to be as active as possible with portfolio businesses and their CEOs. “Raffi says we think we’ve done a good job if we’re one of the ten names on the speed dial list on your iPhone,” Uzan went on to explain.
