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By Eric Auchard
FRANKFURT (Reuters) - British venture capital firm Notion Capital is raising a third fund that will make it Europe's largest bankroller of cloud-based business software start-ups, the company said on Thursday.
The London-based firm said it had initially raised $120 million in a new fund for cloud computing and Software as a Service (SaaS) companies and is targeting upwards of $150 million once fundraising for the round closes later this year.
Collectively, Notion's three funds will have raised about $300 million to provide capital to early-stage firms in Britain and across Europe.
Notion Capital aims to fill a void for fast-growing start-ups that have fewer options for public market listings than their U.S. peers by providing funding to help companies grow to a size where initial public offerings or sizeable mergers are feasible.
"We will be looking to fund companies in areas where Europe can achieve category leadership," Notion Managing Partner and Co-founder Stephen Chandler said in an interview. "I think the fund will create its fair share of billion dollar companies."
Typical deal sizes will range around $2 million up to $10 million and Notion Capital expects to fund around 20 deals, similar to the number of financings of its second fund, but at somewhat higher ticket sizes, Chandler said.
With its two earlier funds, Notion invested in 33 companies, including fast-growing NewVoiceMedia, a customer call center supplier, and Tradeshift, a business procurement and invoicing service, while selling two firms to eBay and Claranet.
"I think NewVoice and TradeShift are on a path to IPO," Chandler said, but added that, for other investments, "we would still continue to see M&A as the primary exit route" to bigger technology players, the most common outcome for European firms.
Notion Capital's partners were founders of cloud-based security provider MessageLabs, which was sold to Symantec (NASDAQ:SYMC) in 2008 for $700 million, in what remains the largest exit of a European SaaS firm to date.