DTCP taps SoftBank as an anchor LP for its next $500-600M fund

Last week, we got a glimpse of how SoftBank is pulling away from some of its more enthusiastic investing, when news broke that it had sold its entire stake in edtech startup Kahoot at a loss. SoftBank has taken a major stake in its next fund, part of a $300 million tranche that it has raised to double.

Digital Transformation Capital Partners is a fund that started as the venture arm of Germany's telecom giant, but is now run as an independent firm.

The first close includes unnamed institutional, pension fund, corporate, and family office investors

Once it would have been a rarity to raise growth rounds in this region, with the more promising startups founded in Europe decamping to the U.S. It is more likely that they will find that investment close to home.

The target is to make it $500 million, which is a $600 million hard cap.

Thomas Preuss, managing partner at DTCP Growth, said in an interview that SoftBank is the main anchor within that.

The firm put an additional 15 million dollars into a Series B for the platform, bringing the total raised to $59 million.

The focus for DTCP will be on cloud-based enterprise software, as well as other big categories in Europe and Israel, along with the US.

While there are still investors in the current market who are focused on deep tech and other categories that may take a long time to see a return, DTCP is taking a more pragmatic view.

There are 25 equity investments in the range of $20 to $25 million targeted by the Fund. To be considered for backing, a minimum of $10 million ARR is required, as well as defensible market positions and technological advantage.

Preuss said that we are still in the Stone Age.

As partners to the larger global firms that have started to take a bigger interest in investing outside of their home markets, it will be interesting to see how the role of more local VCs will evolve in the future. While SoftBank is likely to continue making direct investments, investing in a fund like DTCP helps it source more deal flow, both as an indirect backer and to vet more companies that it may want to pursue directly as well. It is an interesting function given that SoftBank is downsizing operations in a number of markets, including Europe, reducing the team it has on the ground to do this itself.

DTCP invested in 32 enterprise software companies across Europe, Israel, USA and Asia in its first and second funds, and 11 of those companies have gone public. Auth0, Fastly, Sagnavio and GuardICOre are included.