Dawn Capital, a prominent venture capital firm based in London, has secured $700 million in funding across two new funds. Despite the challenging investment landscape for tech startups, Dawn Capital aims to identify and support technology champions in Europe.

The portfolio of Dawn Capital includes successful companies like iZettle, a Swedish online payments firm acquired by PayPal for $2.2 billion in 2018, and Tink, a Swedish open banking company acquired by Visa for 1.8 billion euros ($1.9 billion) in 2022.

Hannah Gubbins, a partner at Dawn Capital, acknowledged the difficulty of raising funds in a market where private startup valuations have declined and investor sentiment towards technology has soured. However, Dawn Capital’s longstanding relationships with institutional investors played a crucial role in securing the funding.

Gubbins explained that despite the challenges, there are still investors eager to invest in the market, recognizing the potential for success that emerged from previous market cycles such as the dotcom bubble and the global financial crisis.

Dawn Capital plans to invest the new funds in 20 companies. The funds will be divided into an early-stage fund of $620 million for Series A and Series B investments, and an $80 million “opportunities” fund aimed at backing successful companies in Dawn Capital’s portfolio.

Venture capital investment has significantly declined as investors reassess their allocations due to higher interest rates and rising inflation. Investors now show more interest in profitable firms with stable revenue streams rather than innovative, growth-oriented companies that take longer to yield returns on investment.

However, investors are closely monitoring the initial public offerings of companies like Arm and Instacart as potential indicators of a tech market rebound.

Despite the overall decline in tech investment, artificial intelligence (AI) remains a booming sector, attracting billions of dollars in funding. Dawn Capital acknowledges the significance of AI and includes it as one of the areas they are exploring. However, their investment focus continues to encompass a broad range of business-to-business software companies in various fields.