Catalyst tests water for 2nd fund

European online financial services venture capitalist, Catalyst Fund Management and Research is to launch a second fund, with a maximum target twice the size of its £40 million maiden fund, European Financial Services Venture Fund (EFSVF).

Founder and chief executive, Rod Schwartz and his team hope to raise between £50 million and £100 million for the new fund, with a first close anticipated early next quarter. Schwartz says he is waiting to see what kind of a response is received from existing and new investors, although it has been good so far.

Claiming a unique position as the manager of Europe’s only dedicated niche oriented financial services venture fund, Schwartz states that it is still early days for the first fund, with the average age of most of its investments no more than 10 months. It is just under 60% invested, with one exit to date and by the time the second fund has been raised, should be fully invested, except for capital set aside for further investment rounds.

The majority of commitments for EFSVF were from Switzerland, the Netherlands, the US and UK. Interestingly, Schwartz and his team spent more time fundraising in the UK than anywhere else, with very little response. He is more optimistic about the UK this time round, saying that in the past UK investors have been reluctant to commit to venture capital funds and were perhaps less willing to invest in a first-time vehicle.

Schwartz adds: “The opportunities in the market now are even more attractive than when we started with our first fund. Prices have come skyrocketing down. There is more and more deal flow and a lot more going on in the UK and around Europe.”

Average investment size will be between £2.5 million and £3 million, maybe drifting up to an average of £5 million. Schwartz has no intention of increasing deal size, saying: “We don’t want to become a big deal firm. We will continue to do classical venture capital. By focusing on smaller deals, we are placing ourselves where the competition is more favourable to us.”