The first quarter of 2023 has been quite bleak for the European startup ecosystem to say the least. Funding fell by as much as 57% compared to the first quarter of 2022, and fundraising is on track for the lowest total since 2015. As such, the recent developments announced from Berlin could be a particularly welcome help.

German VC firm HV Capital announced today that it has raised its ninth and largest fund ever, with €710 million for investments across all growth stages – from pre-Seed to Series D and beyond.

The fund is mainly supported by institutional investors from Europe and the US. HV Capital says it will be split almost evenly into two vehicles: Fund IX Venture and Fund IX Growth. Ticket sizes range from €500,000 to €60 million.

While the firm will look extensively at deals within Germany, it also wants to place around 40% of the fund across Europe. Reiner Märkle, General Partner at HV Capital, said the record fund would provide the company with “new opportunities to invest in the next generation of disruptive ideas.”

Indeed, HV Capital, which was an early financier of German e-commerce company Zalando, has already made four investments from the fund. One is Berlin-based SPREAD, which makes augmented engineering intelligence platforms. Another is in GovTech startup Polyteia, also from Berlin, which provides authorities with data infrastructure to help “improve and accelerate decision-making”.

Fund IX has also invested in Munich-based B2B energy management platform ecoplanet and Copenhagen-based women-founded monitoring, reporting and verification (MRV) software developer Agreena, which supports agriculture with regenerative farming practices and carbon monitoring.

HV Capital said it created the fund with a view to “advancing ESG in the venture capital ecosystem,” with commitments made under Article 8 of the EU Sustainable Finance Disclosure Regulation, or SFDR.

By the end of the fund’s ten-year lifecycle, the company says it will target at least one-third of women in leadership positions in the portfolio. In addition, HV Capital aims to allocate at least 30% of the fund to companies aligned with the European Investment Fund (EIF) climate targets.

SFDR?

If this is your first time encountering SFDR, consider yourself familiar with one of the potentially most influential principles in whether or not you receive funding for your business in the future. Essentially, it is a set of rules set up by the EU to combat greenwashing and help investors make more informed decisions about sustainable investing.

Mandatory companies will have to disclose the potentially negative impact that an investment decision may have on sustainability factors (environmental and social), and how they mitigate the impact, on an annual basis. While it is for individual Member States to decide on the financial consequences, there are other potentially adverse effects of non-compliance, such as reputational damage and sending bad signals to current and future investors.