Revolut's backer Draper Esprit has entered Germany by investing in local VC firm Earlybird
- UK-based venture capital firm Draper Esprit has entered Germany by investing in a local investor, Earlybird Venture Capital.
- Draper will become a 50% backer of Earlybird's sixth fund.
- The deal gives Draper holdings in some of Earlybird's portfolio companies, including cryptocurrency startup ShapeShift.
- Draper chief executive Simon Cook said European venture capital is going through a Silicon Valley-style growth spurt.
Draper Esprit, the listed backer of fintech startups Revolut and TransferWise, has entered Germany by investing in local player Earlybird Venture Capital.
Draper has committed €18 million ($21 million/£16 million) to Earlybird's sixth fund, and promised another €68 million (£60 million) over the next four years. Earlybird's fund is £154 million at first close, and the partnership will make Draper a 50% backer. Draper has also issued a small number of shares to Earlybird.
Earlybird has offices in Berlin, Munich, and Istanbul.
Earlybird cofounder Hendrik Brandis said: "Earlybird has significant backing from mostly institutional private investors, and Draper Esprit has managed to very successfully access public capital markets, funds which we can co‐invest alongside. We believe this creates a very strong partnership."
It's an unusual move for an unusual venture capital firm.
One big advantage for Draper is that it becomes a shareholder in the 13 portfolio startups Earlybird has already invested in with its sixth fund.
Draper chief executive Simon Cook pointed specifically to cryptocurrency exchange ShapeShift, headed up by early bitcoin evangelist and entrepreneur Erik Voorhees. ShapeShift becomes Draper's second crypto holding after its investment in French crypto wallet startup Ledger, at a time when European venture capital firms are increasingly trying experimenting in crypto startups.
The deal also means Draper gets exposure to interesting German startups without having to open an office there. Earlybird and Draper will share deal flow and begin operating as a combined group, Cook said.
"We had a buy-build decision [of], do we open offices in Europe," he told Business Insider. "We've known the Earlybird team for years... they have built a strong platform in Germany... they were also similarly starting to look to invest outside their home market."
Draper may become the 100% backer for Earlybird's next fund but that's several years away, Cook added.
With the Earlybird partnership, Draper now has €1.3 billion at its disposal. The wider ambition, said Cook, is to become a household name in European investment, just as venture capital firms such as Sequoia are in the US.
"Our entire strategy is that Europe is going through the same spurt that Silicon Valley went through in the 1990s, when [VC firms] Sequoia and DFJ raised funds of about $150 million then... scaled up and got to a billion-plus and continued to be household names," he said. "The top 20 [US] funds get 50% of the capital. We believe Europe is going through the same thing, it's all about those firms that can scale up to be a billion-plus."
That might mean further regional partnerships down the line, though Cook said there were no immediate plans. Draper already acquired seed investor Seedcamp's first two funds and backed early-stage UK investor Episode 1.
"We've always been an acquisitive group," said Cook. "We bought Seedcamp, now there's Earlybird, and we entered France by ourselves. Our ambition is to build the biggest venture capital fund in Europe and be operational across all regions. We will always look at different opportunities. We're a very creative group."