Scandinavian VC firm Northzone, which has offices in the Nordics and also London and New York, and includes Spotify, iZettle and Trustpilot among its portfolio companies, has closed its seventh fund — reporting a hard cap at €250 million ($325 million) for the early stage Fund VII.
Backers of the fund are mainly top-tier European institutional investors — e.g. pension funds and family offices, according to the firm.
Northzone identifies its sector areas of focus as fintech, marketplaces, media ecosystem and platforms, ecommerce ecosystems, SaaS, and gaming. Geographically it says it’s less concentrated but invests heavily in what it dubs “key innovation hubs” — including in Northern Europe, the U.K. and New York City.
“A business sector that is currently in a growth/scaling phase includes efficient and innovative business models around e-commerce. The most exciting are subscription and marketplace models that are scalable and cost-efficient, and tackle the bottlenecks in that sector,” it told TechCrunch.
“Fintech is also of interest from an ecosystem perspective: the old institutional setup is crumbling in the wake of technology that runs on new rules. Here we are seeing increasing focus on security as a result of the growing value of data, and hence the cost of fraud.”
Northzone also singled out the potential in the gaming space — especially in the Nordics, which have produced gaming juggernauts such as Supercell, and before them Rovio.
“Gaming as a market is also at a turning point: the Nordics are the clear epicentre of this industry, and studios from all around the world are eyeing the region as a talent pool for the purpose of scaling. This is also where new technology around the development of games and apps is currently being built, and we are very excited to fuel this growth,” it noted.
The firm said it looks for “great teams” when it makes investment decisions, focusing on complimentary skill sets and “drive”. On the product and business side, it’s after scalability, a good product and market fit demonstrated through traction in a large and disruptable market. So, the usual startup criteria.
Asked how the European investment ecosystem has evolved over the years since Northzone began investing — the firm was founded back in 1996 — it noted a “big shakeup” in the number of active VC firms on the scene between 1995 and 2001, a long with the establishment of a number of “prime investors” who have managed and raised multiple funds and established a number of super angels and networks.
“At the same time we have seen increased quality from the entrepreneurs coming out of key innovation hubs: international growth and a global perspective is now a prerequisite, which marks a change from the more regional approach of 20 years ago,” it added.
“It is no surprise that great tech companies are coming out of the Nordics despite the market size. This is definitely an advantage as companies use the market as a testing ground and then scale once they have figured out a great business model. Similarly, Berlin has started to demonstrate scalable and exciting businesses.”
Another shift noted by Northzone is in the skill sets of the workforce, with so-called digital natives coming of working age and “completely changing” the options for startup recruitment vs the picture in the mid 90s. While, at the same time it pointed out investors have also honed their skills.
“Attracting talent from the best universities and business environments is also a relatively new development in the start-up world,” it noted. “Equally, as investors, we have all gained so much experience since then — we were all newbies 20 years ago! ”
Northzone said it expects to make around 30 to 35 investments from the new fund, with sizes ranging from seed funding (€500k to €1 million) and early investments (€1M to €5M), to growth stage investments from around €5M to €15M.