US firms have tended to dominate VC rounds in Europe, driven by Silicon Valley kingmakers with the capital necessary to bet on tech firms across the world. However, one of London’s largest venture capital firms, Balderton Capital, has raised some $305 million it hopes to invest in new European tech start-ups. European sell businesses will certainly welcome the warchest, knowing that there are growing alternatives to the majors across the pond. However, perhaps more importantly, this cash is aimed at Series A funding, demonstrating that European VCs are convincing Limited Partners to bring liquidity to the start-up tech segment. Having provided venture capital to a number of firms, including investments in marketing platform Amplience from NorthStar Ventures and Octopus Ventures in mid-2013, we are certainly fascinated by the growing European corporate financing landscape.
London-based Balderton is no young entrant to the scene, having raised around $2.2 billion for start-ups thus far, making it the largest venture capital fund solely focused on European technology businesses. Some of its most publicised backings have included LoveFilm, Wonga and Betfar, and the company has already put its $305 million fund to good use by investing in two London start-ups, hotel booking site Top10.com and direct debit payments service GoCardless. Interestingly, the new fund was raised from limited partners such as pension funds, including the European Investment Fund and the European Investment Bank. European institutions clearly want to get in on the start-up action driven by the US. Partly, that is down to the sheer growth of the European start-up scene, with Balderton saying they see about 10,000 applications for financing a year.
Local VC firms are becoming braver in the region, and Balderton’s new fund is indicative of such companies wanting to participate in earlier stages of funding. In essence, they are willing to take a risk, similar to US firms but not typical of more risk-averse and mature European investors. It is certainly worth taking a risk at the earlier financing stage, where typically there is less competition, to find the next European success story, such as Spotify or Betfair. In a region where the eurozone sovereign debt crisis has instilled fear in bankers and investors, tech start-ups are leading the way in an economic resurgence based on greater innovation and forward-thinking than other speculation activities, such as the property market.
For European tech start-ups, who are looking for funding or acquisition, greater competition is only a positive, and with Asian VCs also increasingly joining the bidding the region offers a hotbed of financing activity that is only welcomed by us. The entry of traditional European financiers into tech funding will certainly improve options for target firms, and offer sell businesses more room for manoeuvre.
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