Last week, we got a glimpse of how SoftBank is pulling back from some of its most exuberant investments in recent years, when news broke that it had sold its entire stake in edtech startup Kahoot, to loss. This week, we take a look at what SoftBank is doing to diversify how it deploys its capital with a little less direct risk to itself: DTCP says SoftBank has taken a significant stake in its upcoming fund, part of a tranche of 300 million dollars which it increased to double during growth cycles in Europe.
For context, DTCP is a fund that started out as the venture capital arm of German telecom operator Deutsche Telekom, but is now run as an independent company – DT remains an investor, but in a small rebrand pivot, DTCP now stands for “Digital Transformation Capital Partners”. ”.
Other participants in this first close include DT, as well as unnamed institutional investors, pension funds, corporates and family offices.
This fund, DTCP’s third, bears witness to the path taken by the European ecosystem in terms of funding rounds: in the past, it would have been rare to raise funding rounds in this region, with the most promising startups founded in Europe decamping to in the United States to attract investors there if they wanted to develop. These days, they are more likely to find that investment closer to home.
This latest DTCP fund is set to close in March 2023 and the goal is to increase it to $500 million (or a cap of $600 million).
In this framework, SoftBank, alongside fund founder DT, are the pillars – by far the largest backers – said Thomas Preuss, managing partner at DTCP Growth, in an interview.
The company is already investing in the fund — specifically, it invested an additional $15 million in a Series B for conversational AI platform Cognigy.ai, bringing the total raised for this round to $59 million.
More generally, DTCP will focus on cloud-based enterprise software, SaaS, cybersecurity, web3, AI and fintech – all major categories in Europe and Israel, the key regions that DTCP will cover, alongside the United States
And notably, while there remain investors, even in today’s market, who focus on deep tech and other categories that could take a long time to see a return, DTCP is taking a more pragmatic view – something that could have found an echo at SoftBank.
The Fund targets approximately 25 equity investments in the $20-25 million range for early-stage or growth-stage companies. “Defensible market positions and technological advantage” are on the agenda, as is another key requirement: a minimum of $10 million ARR to be considered supported.
“We’re still in the Stone Age when it comes to deep tech,” Preuss said.
It will be interesting to see how the role of more localized VCs evolves in the years to come, as partners of large global companies that have begun to take a greater interest in investing outside of their home markets. While SoftBank is likely to continue to make direct investments, investing in a fund like DTCP helps it drive more deal flow, both as an indirect funder and to vet more companies than it does. might also want to sue directly. This is a particularly attractive feature given that SoftBank would reduce its operations in a number of markets, including Europe, thus reducing the team it could have on the ground to do it itself.
DTCP’s first fund in 2015 and second fund in 2018 totaled $410 and was invested in 32 enterprise software companies across Europe, Israel, the United States and Asia, and DTCP notes that 11 of these investments have been acquired or made public so far. They include Auth0, Fastly, Sagnavio, and Guardicore.