TL;DR:
- Notion Capital, a leading venture capital firm, has closed its fifth fund at €300 million ($325.6 million).
- The fund focuses on business software investments, expanding beyond traditional enterprise SaaS.
- The portfolio includes investments in over 100 early-stage companies across Europe.
- Notion Capital plans to make 20 core Series A+ investments from this fund.
- The fund is Euro denominated and based in Luxembourg, reflecting a pan-European investment approach.
- Three senior promotions have been announced within Notion Capital.
- The managing partner believes the term “Enterprise SaaS” is no longer sufficient to describe the company’s focus.
- Notion Capital is open to investing in pre-seed and growth-stage opportunities.
- The company sees potential in verticalized plays and companies with proprietary data in the generative AI space.
- Notion Capital criticizes big rounds of funding in unproven AI startups.
- The company believes that generative AI will be led by Big Tech and may commoditize quickly.
- Notion Capital plans to introduce a third Opportunities Fund in 2024.
Main AI News:
Notion Capital, a prominent venture capital firm, has successfully closed its fifth fund at an impressive €300 million ($325.6 million), reaching its “hard cap.” This milestone marks the beginning of a new phase for the company, which has capitalized on its initial focus on enterprise Software-as-a-Service (SaaS) ventures over the past decade. Notion Capital’s portfolio boasts investments in over 100 early-stage companies, such as CurrencyCloud, GoCardless, Paddle, YuLife, HeyJobs, Upvest, Mews, Cobee, TestGorilla, Unbabel, and Workable.
Fund Five has already made significant investments in Bound, DataOps, M3ter, and Resistant AI. Looking ahead, the venture capital fund plans to make approximately 20 core Series A+ investments from this fund. Notably, the “Notion V” fund, denominated in Euros and based in Luxembourg, reflects the company’s pan-European focus on investments—an outcome possibly influenced by the ramifications of Brexit.
In addition to its latest fund close, Notion Capital has announced three senior promotions within its ranks. Itxaso del Palacio, previously a partner at M12 (Microsoft Ventures), has assumed the role of general partner. Stephanie Opdam and Kamil Mieczakowski have been elevated to partner positions. Del Palacio, since joining Notion in 2018, has led investments in Bound, Cledara, Cobee, YuLife, and other ventures. Opdam and Mieczakowski, also joining in 2018, have spearheaded investments in DataOps and Resistant AI.
Stephen Chandler, managing partner at Notion Capital, believes that the term “Enterprise SaaS” no longer adequately encompasses the company’s focus. Chandler expressed, “SaaS has evolved beyond the application layer into infrastructure, hybrid, cloud, edge computing, all of those kinds of things. But also different monetization models.” To capture this expanded scope, Notion now employs the phrase “business software” to describe its portfolio, acknowledging the diverse range of offerings, including subscription software, payment sharing, embedded finance propositions, and marketplaces. However, Chandler admitted, “We tend to use the phrase ‘business software’ now, even though sometimes I think that’s a bit boring.”
Despite this shift in terminology, Notion Capital’s strategy remains consistent, with a continued emphasis on Series A investments, which align with their core strengths. Chandler also mentioned that the company is willing to invest smaller amounts in pre-seed companies, going as low as €50,000. Furthermore, Notion is open to participating in growth-stage opportunities.
When asked about the potential of generative AI, Chandler identified verticalized plays as the most intriguing within their purview. Notion Capital is particularly interested in companies with proprietary data that can be leveraged effectively. While acknowledging the emergence of compelling companies in this space, Chandler also expressed concerns about the hype surrounding AI startups. He criticized investors who pour large sums of money into unproven ventures and highlighted the recent $105 million investment into Mistral as an example. Chandler questioned the profitability of such investments, stating, “Even if the company really nails it, you’re never gonna make any money.”
Chandler believes that the horizontal play of generative AI will primarily be led by Big Tech companies, as they possess the necessary resources and expertise. He also foresees rapid commoditization in this field.
Looking ahead, Notion Capital plans to introduce a third Opportunities Fund in 2024, aimed at providing additional growth follow-on capital to the firm’s best-performing venture assets and other European business software companies in the growth stage. Cortes Capital LLC, KfW Capital, and TNO are among the investors in the new fund, while British Patient Capital, Novo Holdings, and RSJ are returning limited partners.
Conclusion:
Notion Capital’s successful fund close and expansion into the business software market highlight its strong position in European venture capital. The firm’s pan-European focus and strategic investments demonstrate its commitment to driving growth and supporting the evolution of the software industry. However, Notion Capital expresses caution regarding the hype and large investments in unproven generative AI startups, believing that the true potential lies in verticalized plays with proprietary data.
