Esmertec lands bumper software round

Earlybird Venture Capital portfolio company Esmertec has raised $27m in what is the largest fundraising by a European software company since mid-2002.

Zurich-based software company Esmertec has closed one of the largest VC fundraisings in 2003 and the largest in the European software sector for 15 months, raising a total of $27.2m.

Esmertec, which develops java platforms for mobile telephones, was set up in 1999 with seed financing from Partners Group, Earlybird Venture Capital and Sofinnova. A further investment was made by the three firms in 2001, when Sofinnova’s Jean Bernard Schmidt joined the company’s board.

In addition to the company’s existing investors, the third round of financing was backed by Credit Lyonnais, French family office Quilvest, Rothschild, BV Group and Swiss VC Invision.

Esmertec has existing contracts for its Java technology that will result in the use of its software in about 120m phones worldwide. The proceeds of the latest financing round will be used to expand Esmertec’s business and add new products to its existing services.

“Esmertec’s strategy of expanding the market for Java applications beyond a small niche of expensive smartphones into mass markets has resonated very well with application developers and phone manufacturers,” said Roland Manger, partner at Earlybird Venture Capital and a director of Esmertec.

Earlybird principal, Wolfgang Seibold said the large round was further evidence of a pick-up in the European venture capital market, which has enjoyed recent successful exits with the IPO of Wolfson in the UK and the successful exit of SUSE Linux by AdAstra, Apax Partners and e-millennium 1 Fund. “With the sale of SUSE and the listing of Wolfson, we have seen the first opening of the exit market. The market is definitely picking up.”

Earlybird has been among the most active venture capital firms in the German market in 2003. So far this year, twelve of its portfolio companies have received a total of $92m of financing from Earlybird and other third-party private investors. Earlybird is Germany’s third most active venture capital investor for 2003 to date, having invested E22.5m in the nine months to September 30. Only TVM (E39.3m) and 3i Deutschland have invested more.

The firm is investing from the Earlybird III fund which closed on E230m in 2000. The fund, which invests in early-stage technology opportunities, is 55-60 per cent invested.