DTCP Growth Secures Fresh Capital to Invest in Enterprise Companies
German investment management firm DTCPhas successfully closed its third growth fund and an initial closing of its new early-stage fund, Incharge Capital, a joint venture with Porsche focusing on mobility startups. The total amount raised is $450 million.
Background
DTCPhas undergone significant changes over the years. It was initially an acronym for ‘Deutsche Telekom’ and had strong ties to the German telco. However, DTCP has now become independent and stands for ‘Digital Transformation Capital Partners.’ Despite this independence, Deutsche Telekom remains the anchor investor in DTCP Growth’s funds.
Fundraising Challenges
In 2022, DTCP Growth aimed to raise $500 million with a hard cap of $600 million, expecting to complete fundraising by March 2023. However, the "very complicated market environment" for fundraising forced DTCP to settle for a smaller growth fund size of $330 million.
Investment Strategy
DTCP Growth’s managing partner, Thomas Preuß,told TechCrunch that they have already made four investments in companies focused on AI and automation: Anecdotes, Cognigy, Cohere, and Quantum Systems. These companies are developing well and align with DTCP’s investment thesis.
DTCP Growth aims to invest between $20 million to $25 million in stages ranging from Series B to late-stage funding rounds, where capital is scarce. Unlike some other funds that focus on early-stage investments, DTCP Growth is positioned to provide growth equity to European companies.
Advantage Over Competitors
DTCP has an advantage over its competitors due to its strong relationships with relevant players in the ecosystem, established over a decade ago when it launched its first growth fund, followed by a second vintage in 2018. This legacy gives DTCP an edge, as evident from its impressive track record: out of the 36 enterprise software companies backed by its previous funds in Europe, Israel, and the U.S., one has gone public, and 13 have been acquired.
Leveraging M&A Opportunities
DTCP’s investment strategy includes identifying market segments that are highly acquisitive. This approach allows it to create value through mergers and acquisitions (M&As). The firm has a playbook for preparing its companies to be acquired by strategics or private equity buyers, which is part of an investment process driven by both thesis and data.
DTCP’s M&A strategy starts early in the investment journey. It evaluates companies and their KPIs using in-house software, DTCP Flightpath, also known as "the upside-down investment approach."
Early-Stage Fund
The decision to add an early-stage fund was inspired by the number of companies on its radar that were often too early to be investable by its growth fund. This new fund is based in Berlin and has a size of $125 million.
The addition of Incharge Capital, a joint venture with Porsche, focuses on mobility startups. It represents DTCP’s expansion into new areas while maintaining its core focus on digital transformation.
Conclusion
DTCP Growth’s successful fundraising effort and diversified investment strategy position it well to continue supporting European companies in their growth journeys. The firm’s strong track record and unique approach to M&A opportunities set a high standard for competitors in the venture capital space.
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