White Star Capital looking for scale-ups to expand internationally

Second White Star fund has $180m to invest in software, ecommerce and online marketplace growth businesses

White Star Capital, the international venture capital fund, is looking for scale-ups in the e-commerce, Software-as-a-Service and online marketplace sectors.

So far, it has made over 10 investments and deployed around half of the $180m it raised in 2017. Typically, White Star Capital invests anything between $1m and $6m in Series A funding, leading the funding round. In exchange, it takes 10pc-20pc in equity and a seat on the board. Its investment are tied up for between 5-10 years.

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Successful exits from previous investments include Dollar Shave Club, which sold to Unilever for $1bn, and Echo, a prescription app which Lloyds Pharmacy-owner McKesson UK bought in June.

Nick Stocks, general partner in its London office, said: “What we look for in our second fund is businesses that are becoming scale-ups. Capital is used to grow that business: It might be launching into new markets, new products or marketing and sales expenditure for scale-ups beyond the proof of concept phase.

Looking for expansion

“What we typically look for is post-revenue companies looking to raise capital to scale their business internationally. We will be a great VC to have on board if you’re looking for expansion into Continental Europe, America or Southeast Asia or Asia.”

Previously, White Star raised $70m in 2014 to seed fund 18 startups including US meal delivery service Freshly in the US, which is now onto Series D funding; KeyMe robotic locksmith kiosks; and, in Europe, cybersecurity firm Red Sift and fintech machine-learning startup AIRE.

Stocks is a former UBS investment banker who joined public-sector cloud migration service UKCloud, helping to raise seed, Series A and Series B funding. He then joined VC Global Founders Capital as a principal, helping manage its billion-dollar fund. Stocks joined White Star in 2016.

See also: Europe raises record-breaking €10.6bn of venture capital in first half 2019

Stocks said: “I found what I was really looking for if I was designing a VC. White star’s core thesis was two beliefs: first, that the best startups were going to come from outside Silicon Valley, whether it’s Europe, Southeast Asia or Asia, and that they were under-capitalised from a VC perspective; second, because of technology you can become a global sector leader very quickly. You don’t have to dominate your local sector first. It’s become a global playing field.

White Star has already led Series A rounds in companies that are trading in 30 countries already, Stocks said. It used to be that Series A was just for domestic expansion and Series B was for international. That’s not the case anymore, he said.

The fund was co-founded in 2014 by Eric Martineau-Fortin, a private equity and mergers industry veteran, and Christian Hernandez Gallardo, a former European executive at Facebook, Google and Microsoft.

As a private angel investor, Martineau-Fortin initially put money into Dollar Shave Club and Twitter via start-up incubator fund Betaworks in New York.

The fund now has 25 staff spread out across six offices worldwide including Montreal, Paris, Tokyo and Hong Kong.

So, what’s the best way that owners of scale-up SaaS, e-commerce or online marketplace businesses should approach White Star Capital?

“The best way is through a warm introduction from a previous company we’ve already backed with seed money or through one of our founders or co-investors,” said Stocks.

“The one piece of advice I would give to any entrepreneur is to begin building relationships with your next set of investors before funding rounds. So, if you’ve just raised seed, you need to start thinking about future Series A investors, and so on.”

Be aware though that the chance’s of getting through White Star’s selection process are slim: out of 7,000 business plans sifted over the past two years, the fund has only made 14 investments. That’s a conversion rate of just 0.2pc.

“There are some business ideas that are very quick no’s,” Stocks deadpans.

White Star typically takes around nine months to get to know founders ahead of making an investment

Stocks said: “The thing that I’m most excited a lot in Europe is the quality of companies ripe for Series B funding because of how the Series A ecosystem has developed.”

Further reading

How to pitch to a venture capitalist – a Growth Business guide

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