The shortage of progress capital in Europe is such a persisting problem that some early-stage corporations have taken the matter into their very own arms. London-headquartered agency Notion Capital is one among them.

In 2017, Notion Capital was one of many first in Europe to shut an alternatives fund to supply its portfolio corporations with follow-on capital. Now, it has closed a $130 million progress fund, almost twice the dimensions of its earlier one, that may even make investments outdoors of its portfolio, TechCrunch realized solely.

U.S. VCs that used to fill the expansion capital hole at the moment are inclined to focus extra on their very own market, mentioned managing associate Stephen Chandler, noting that “opens up a chance for European corporations like ourselves to make up a few of that distinction and be actual European champions.” 

A few of the European corporations Notion intends to “champion” from its new Progress Opps III fund are tied to the rising demand for extra sovereignty, together with these specializing in protection and provide chain logistics. However like many, the VC agency can be drawn to AI, which Chandler sees as a brilliant cycle inflicting “a profound shift in the way in which that software program is delivered and consumed.”

Notion Capital gained’t put money into the infrastructure layer comparable to giant language fashions. As an alternative, the agency sees alternatives within the software layer that may “massively improve” the dimensions of its market, Chandler mentioned. Whereas Notion’s flagship fund has traditionally been identified for its robust penchant for SaaS, cloud, and fintech, these will now be AI-infused, and joined by new verticals.

The agency expects to make a dozen investments and has already began deploying its capital from the funds. Offers, up to now, embody Upvest, a inventory buying and selling API out of its early-stage portfolio, in addition to exterior corporations Octopus Power spinoff Kraken, and Nelly, a startup that builds software program and monetary merchandise for the medical sector, based on Notion Capital.

To provide itself some “sturdy objectivity,” in Chandler’s phrases, follow-on offers will likely be carried out by devoted progress fund companions who may even “exit and supply progress stage alternatives outdoors of the portfolio.”

One in every of them is current Notion Capital associate Stephanie Opdam (on the left of the image). She’s going to now drive this progress technique alongside Jessica “Jess” Bartos, previously a principal at Salesforce Ventures. A U.S. nationwide, Bartos can be Notion Capital’s first exterior associate rent (earlier companions have been promoted internally.)

“As a result of this was a brand new technique, we felt we may gain advantage from exterior experience at that progress stage,” Chandler mentioned.

Subsequent progress funds might also be simpler to lift. Whereas Europe has suffered from a scarcity of pension funds investing in enterprise capital corporations, incentives have began to alter in a number of international locations, together with France with the Tibi initiative and the U.Okay. with the Mansion Home Accord.

Regardless of its British roots, Notion Capital isn’t solely depending on the U.Okay.’s regulatory framework; this newest Progress Opps III fund is denominated in euros and Luxembourg-based. 

To lift this new automobile, which brings its property underneath administration to over $1 billion, the agency relied on its current relationships with restricted companions from throughout continental Europe, the U.Okay., MENA and the U.S.

“One thing like 85% of our cash comes from establishments; and inside that, we’re very properly geographically dispersed,” Chandler mentioned.

However whereas latest initiatives to mobilize long-term institutional capital  “[weren’t] actually a characteristic on this fund,” he added, “the indicators are extraordinarily constructive, and that’s nice [for] addressing that elementary drawback we began with, when it comes to among the gaps in progress capital we’ve got in Europe.”

“If this lastly works out and extra LPs take part in progress stage investing, this might translate into extra competitors for Notion Capital. A minimum of on the progress stage, the place it’s much less established than on the early stage. Nonetheless, Chandler sees each as a continuum.

“Our actual aggressive benefit on this progress technique is leveraging the attain that we’ve got in our early stage technique,” Chandler mentioned. “Most progress funds don’t have that. They’re on the market making an attempt to do all of their sourcing on the progress stage as soon as they put their head above the parapet when it comes to scale and momentum.”

In distinction, he mentioned, Notion Capital has many contact factors with founders through the years, together with by way of its very lively platform group, and is versatile when it comes to its examine dimension.

Regardless of its expanded scope, Progress Opps III’s most important asset arguably stays Notion Capital’s portfolio. The agency has invested in additional than 150 startups since its inception, together with Currencycloud, GoCardless, Mews, Paddle, and Quantum Techniques. Whereas some are pre-AI or have been exited, the remaining corporations seemingly embody future champions — a monitor report that ought to make exterior corporations extra prepared to take their progress checks, even when progress capital turns into much less scarce in Europe.