Index Ventures raises new €350m early-stage tech fund, calls for more European IPOs

Nina Fowler 2012-06-18 15

Major European VC Index Ventures, a previous investor in Berlin-based companies Amen, SoundCloud, Gidsy, Readmill and others, has raised a new €350 million fund to back tech companies and will continue its commitment to Berlin as a priority startup hub.

The new fund is part of €1 billion raised over the last year, alongside two other new funds focusing on later-stage tech investments (€500 million – November 2011) and life sciences (€200 million – March 2011). The new early-stage tech fund will provide seed, Series A and Series B venture capital and will continue Index’s focus on Berlin, London, New York City, San Francisco, Stockholm and Tel Aviv.

It’s welcome news for startups in Berlin and wider Europe, which has traditionally suffered from a lack of early-stage funding for tech startups. Index Ventures, which has offices in Geneva, San Francisco and London, is also able to act as a bridge between Europe and the US for companies looking to enter new markets, raise later-stage funding or exit via a US buyer (more on that later).

Neil Rimer

Where will the new funds go?

The new fund will be invested in about 35 companies over the next three years, from early stage through to exit. Index Ventures partner Neil Rimer (pictured) told GigaOm that Index is hoping to generate investor returns ten times the size of the €350 fund (at the top of the range achieved by the most successful VC funds; many others fail to return anywhere near that amount). With that ambitious goal in mind, where will the new funds go?

Index Ventures looks to invest in three types of startups: European and Israeli companies looking to become “global category leaders” (such as SoundCloud); innovative US companies with “breakout international potential” (such as Etsy and Path); and companies capable of “dominating large national and regional markets” (eg. Russia’s Ozon).

According to today’s press release, the industries Index Ventures is currently most excited about (again, pretty broad) are:

  1. Commerce, especially fashion, including EDITD, Farfetch, Just Eat, Moo, Nasty Gal, Not on the High Street, Photobox and Stylistpick.
  2. Marketplaces, including Etsy, Funding Circle, Housetrip, PeoplePerHour, TransferWise and Viagogo
  3. Cloud and Big Data, including Alertme, Chartbeat, Climate, Cloud.com, Criteo, Dropbox, Factual, Kaggle, Hortonworks, Mimecast, OpenX, Pentaho, Right Scale, Soluto and Zuora.
  4. Mobile and Social, including Flipboard, Fon, King.com, Lookout, Moshi Monsters, MyHeritage, Path and Rebtel.
  5. Financial Services, including Adyen, Boku, Erply, Funding Circle, iZettle, TransferWise, and Trialpay.”

Index Ventures – champions of the European IPO

Europe may now have access to a new early-stage tech growth fund – but there’s another part of the ecosystem that Index Ventures’ Neil Rimer believes is sorely lacking if Europe’s growth is to keep up with other markets: successful tech company listings.

“As the the US continues to churn out high profile IPOs for Zynga, Groupon, Linkedin and Facebook, the London IPO machine is eerily silent,” he wrote in a recent blog post. ”What is more alarming than the track record is the defeatist attitude of European companies considering IPOs.”

In a press release today, Index Ventures called for Europe – and primarily London – to create a viable IPO market for tech companies “so that these companies don’t end up listing in New York or end up as trade sales”. Why does this matter? Rimer points out that, by providing liquidity to founders and employees, IPOs often push them to become angel investors or entrepreneurs themselves – and does this without requiring the company to be sold outright to a single buyer. “Finally IPOs allow millions of shareholders to share in the value created by these companies after they have gone public,” he concludes. (Try this recent Economist article for more on why public companies matter).

Rimer sees more than a few likely candidates for a future IPO within Index’s own portfolio. At Index Venture’s recent annual meeting, “we counted 20 companies (Criteo, Adconion, Photobox, Moleskine, JustEat, King, to name a few) born in Europe, that are at or fast approaching a point of being IPO-ready. Collectively, these companies generated over to $2 billion in revenues last year, are growing at more than 80 per cent year-on-year and have created over 5,000 jobs – and this is just from our own portfolio.”

Sounds like we might be watching out for more than just funding announcements in the near future…

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