Global Founders Capital, a Berlin-based VC firm, is undergoing a strategic shift as it becomes the venture arm of Rocket Internet, the German startup factory. This move comes after a period of relative quiet from the firm, which had previously raised two $1 billion funds and was involved in numerous deals each year.
The decision to exclusively invest from Rocket Internet’s balance sheet was driven by various factors. According to David Sainteff, a partner at Global Founders Capital, the firm believes that the current market conditions do not present many good investment opportunities that meet their criteria. Additionally, they feel that they do not need more capital to remain competitive against other investors for deals. As a result, they decided against raising another fund and will utilize Rocket Internet’s capital for future investments.
Initially, Global Founders Capital operated as a traditional VC firm with several limited partners participating in funds. With their first fund, they backed successful startups like Personio, Revolut, and SumUp. In their second fund, they invested in companies such as Pennylane, Ankorstore, and Seyna. It is worth noting that Rocket Internet has been an investor in Global Founders Capital since its inception, indicating close ties between the two entities.
While the decision not to raise another fund may seem surprising given the firm’s past performance, Sainteff confirms that the first fund is expected to generate returns between 3x and 4x. The second fund is still too early to evaluate accurately, but they have already identified clear winners like Pennylane, which is now valued at over €1 billion.
As a result of this strategic shift, Global Founders Capital has become smaller, with only five partners remaining. The firm will now focus solely on early-stage investments and will have the ability to make follow-on investments in later funding rounds.
The reasons behind the decision not to raise a third fund are likely a combination of factors. Limited support from potential partners and the current state of the tech industry may have played a role. Sainteff explains that it was difficult to have the imperative to deploy capital when raising funds from limited partners, and the firm felt it was not the best moment to do so. However, he does not rule out the possibility of raising a fund in the future when the conditions are favorable.
In summary, Global Founders Capital’s pivot to becoming Rocket Internet’s venture arm marks a significant change in its operations. The firm’s decision not to raise another fund is based on its assessment of the current market conditions and its ability to remain competitive without additional capital. While the new strategy may seem counterintuitive given the firm’s past success, it reflects their confidence in their existing investments and their willingness to adapt to changing circumstances.