Soundcloud veteran founds €25m European metaverse venture capital fund

David Haynes, one of the founders of music streaming company Soundcloud, has teamed up with XR industry veteran Petri Rajahalme to launch a €25 million fund specializing in investments in the metaverse.

FOV Ventures, which has so far secured €16.5m of its €25m target, is looking to back some 25-30 metaverse startups at the seed and pre-seed stage. the metaverse, an immersive shared virtual world where people come together to play games, socialize and work, was seen as the next big thing.

Interest in the Metaverse has grown since last year when Mark Zuckerberg said it would be the future direction of Meta (renamed from Facebook for this very reason) while Epic, creator of the online multiplayer game Fortnite, has raised a $1 billion funding round. While many VCs have said they want to invest in metaverse technology, there are still few specialized funds on either side of the Atlantic.

“We’ve been looking at this for five or six years — we started talking about metaverse as spatial computing, and investors didn’t understand what that meant,” Haynes told Sifted. “All of a sudden in the third and fourth quarters of last year everyone including CNN was covering it, and Mark Zuckerberg rebranded his whole company to Meta, obviously that helped a lot.”

Sponsors backing the fund are a mix of large institutions, family offices, venture capitalists looking to gain exposure to the metaverse, and individual investors who have made their money in the gaming industry, Rajahalme and Haynes say. .

The fund will be one of the few in Europe to explicitly focus on investments in the metaverse. Luxembourg-based Hiro Capital recently announced a $340 million investment to invest in seed and early rounds in categories including esports, creator platforms and the metaverse.

FOV’s €25m fund is relatively small, but Haynes said a niche investor could do a lot with a smaller sum.

FOV will invest in three different types of metaverse businesses: those that create games and experiences in the metaverse, including NFTs, digital fashion, shopping, and concerts. So-called “camera commerce” — using augmented reality as part of the shopping experience — is expected to influence some $36 billion in retail purchases by 2024, according to a ARtilery Intelligence report, an AR research group. FOV has already started making small investments in virtual fashion and NFT product marketplaces.

They’re also looking at startups in the corporate metaverse — either virtual meetings or digital twins for factories. Satya Nadella made one key objective for Microsoft, and there will be opportunities for European companies providing tools for meetings, training and factories. The third area of ​​investment will concern startups creating the “tools” of the metaverse: platforms, avatars, sound effects and sets.

FOV will not invest in cryptocurrencies and NFTs – although these are considered by some people to be an essential part of the metaverse.

Haynes and Rajahalme acknowledge that the hype around the metaverse has its pros and cons. On the one hand, it made it easier for them to raise funds. But heightened expectations could also mean disappointment. One of the biggest risks, Haynes says, is timing.

“It’s about which areas are going to happen immediately versus which ones will take longer to play out. We would invest in a development tool that allows people to create AR experiences, but we probably wouldn’t invest in a company that really relies on consumer AR glasses to get to market. »

Maija Palmer is Sifted’s Innovation Editor. She covers deep tech and business innovation, and tweets from @maijapalmer

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