Two large equity funds came out of the gate this week. So, what gives?

Earlier this year we covered how Liquidity Group, a growth-stage debt financier, raised $40 million and launched a $250 million debt fund for tech companies. Backers included Apollo (private equity, and Yahoo! owner) and MUFG (a Japanese bank).

Liquidity is an interesting beast. It’s part tech platform and part lender, using its technology to make decisions on deploying debt facilities and other financial solutions from $5 million to $100 million. It claims its processes are relatively faster than more traditional approaches.

It also runs “Mars Growth Capital Europe” a $250 million debt fund to provide growth financing specifically to late-stage tech companies and mid-market companies.

Now, MUFG and Liquidity are banding together to launch five non-dilutive (debt) funds under Mars. This is the first equity fund, powered by the same technology referred to above, and will be targeted at late/growth-stage companies. Mars Growth Capital, and Dragon Fund itself, are both based in Singapore and the fund is targeting equity investments in APAC.

“Dragon Fund I” will make growth equity investments in private, mid to late-stage tech and tech-enabled companies, initially focusing on the Asia-Pacific region. Deal sizes will range from $20 million to $100 million. MUFG is also extending its capital commitments to Mars Growth Capital’s non-dilutive funds fund from $750 million to $1 billion.

Ridhi Chaudhary, managing director and GP partner of Dragon Fund, said in a statement: “With the power of Liquidity Group’s ML platform, the investment teams will be able to evaluate investment opportunities comprehensively and at a faster pace.”

Meanwhile, this week, Dawn Capital, one of Europe’s larger specialist B2B software VCs, raised $700 million to invest. This move was more significant news for early-stage companies.

This comprised the $620 million Dawn V, aimed at Series A and B stages with initial investments of $10 million to $40 million, and enough capital for follow-on rounds. Dawn Opportunities III will be an $80 million follow-on fund, later-stage fund aimed at Series C stage onwards.

Dawn has to date invested in Mimecast (formerly Nasdaq-listed, taken private by Permira in a $5.8 billion transaction), iZettle (sold to PayPal for $2.2 billion cash), Tink (purchased by Visa for $2.0 billion), LeanIX (recently acquired by SAP) and, more recently, Collibra, Dataiku and Quantexa, all unicorns.

Haakon Overli, general partner at Dawn Capital, calls this a “a great point in the cycle to be investing and we see the opportunity in Europe only increasing.”

So what are we to make of the arrival of such funds?

Well, here are some observations you might like to mull over.

Firstly — and this is what I’m hearing at the private dinners and drinks events amongst VCs in London, for instance — late-stage capital to bolster pro-IPO companies is coming back.

Frankly, most observers know that the last quarter of this year is going to be flat. However, it will now become a key marketing period for late-stage and growth funds to get into companies waiting for markets to bounce back in Q1/Q2 of next year. And they want to be in those deals. Hence Liquidity coming out of the gate with the above. No doubt there will be others.

Secondly, pure, early-stage VC funds like Dawn, which have a deep bench in deep tech (one might say) are quite happy to be raising and deploying funds at ab early stage right now. It will still take at least a few years for those bets to mature, and with valuations down, early-stage VCs with new funds this year are getting far better deals than the ones that deployed in 2021 and 2022 (where large and painful hangovers remain). Plus, the generative AI booms will suck up a lot of that early-stage capital.

These sentiments were echoed this week at two events I attended in London, coincidentally one with an early-stage fund, one with a late-stage. For example, here’s an early-stage fund partner over drinks: “The market is fine at early stage, especially in AI. The rest of this year for IPOs? Dead. Everyone is waiting for next year.”

Meanwhile, the late-stage VC dinner was bullish about next year and even talking about deploying late/growth capital to prep their portfolio for M&A and IPO. A typical phrase went something like “we’re prepping to help our companies do M&A in this year, and looking to second quarter next for the markets to come back.”

So there you have at least some explanation as to why these larger funds are appearing in what, outwardly, appears to be a down/flat market for startups right now.