London-based venture firm Notion Capital has announced the closing of a $130 million growth fund dubbed Growth Opps III, aimed at narrowing Europe’s chronic shortage of follow-on capital for scaling startups. Unlike prior funds focused largely on its own portfolio, the new fund will also invest externally, with particular interest in AI-infused SaaS, defense, supply chain logistics, fintech, and other application-layer technologies. The move responds to a broader retreat of U.S. VCs from European growth deals, offering local firms an opportunity to step in as “European champions.” Notion expects to deploy capital across roughly a dozen investments, including already committed ones such as Upvest, Kraken, and Nelly. To maintain objectivity, follow-on deals will be handled by distinct growth partners who will also source new upstream opportunities. Meanwhile, Europe continues to see momentum in strategic tech and defense investing: for instance, European VC flows into defense and security tech hit a record $5.2 billion in 2024 per Financial Times, and the European Commission has committed to a new “Scaleup Europe Fund” to deepen late-stage funding.
Key Takeaways
– Notion Capital is shifting from portfolio-only follow-ons to a proactive growth fund that will invest outside its existing holdings, seeking to fill the European late-stage capital gap.
– Focus sectors include AI applications, defense technologies, supply chain resilience, fintech, and SaaS — especially where sovereignty and resilience are strategic imperatives.
– The fund reflects a larger European trend: U.S. VCs are reallocating toward domestic markets, while European institutions and firms are stepping in to fund strategic industries and reduce reliance on foreign capital.
In-Depth
The gap in scaling capital across Europe has long been a structural drag on the region’s startup ecosystem. Early-stage investors have often nurtured promising firms, only to find that as those firms look to scale, funding becomes scarce or requires turning to U.S. or Asian backers. Notion Capital’s launch of a $130 million growth fund is a strong signal that local players are beginning to take matters into their own hands.
Growth Opps III is materially larger than Notion’s prior growth fund, and—critically—broadens its mission beyond already invested portfolio companies. Whereas before Notion’s opportunities fund primarily supported internal winners, the new strategy anticipates external sourcing of growth candidates, managed by dedicated partners to preserve deal discipline and avoid favoritism. The sectors it targets are telling: the firm will avoid foundational AI infrastructure (e.g. large LLM training systems), instead betting on the application layer where software meets domain use cases. They intend to back AI-infused SaaS and cloud, fintech, logistics, defense, and supply chain firms. Already, deals are in motion: Upvest (in their early-stage portfolio), Kraken (dual-use unmanned surface vessels), and Nelly (healthcare financial tooling).
This strategy dovetails with macro shifts in European capital markets. U.S. VCs, previously more aggressive in European growth deals, are increasingly concentrating on their domestic markets, opening a window for European firms to reclaim leadership. At the same time, Europe is seeing heightened interest in defense tech: VC investment in defense and security has surged, reaching a record $5.2 billion in 2024, according to the Financial Times. Governments and EU institutions are also responding: the European Commission’s “Choose Europe to Start and Scale” plan includes a new public-private Scaleup Europe Fund exceeding €10 billion, aiming to catalyze private capital into scaling firms rather than just seeding them.
But challenges remain. Exit environments (IPOs, acquisitions) are often thinner in Europe, and institutional inertia means many pension funds still shy away from riskier growth bets. Notion’s euro-denominated fund, domiciled in Luxembourg, represents a deliberate bet on Europe’s capital markets maturing. If this bet pays off, it may encourage more institutional LPs to increase allocations to growth stage funds and ease capital constraints for scaling firms.
In sum, Notion Capital’s move is both symbolic and practical: it reflects growing confidence that Europe can supply its own scaling capital, particularly in strategic sectors tied to resilience and sovereignty. The success of this strategy may help Europe shift from being a development ground for U.S. acquirers to a self-funded generator of global tech champions.