Bebo a solo hit for Balderton Capital

Balderton Capital, the U.K.-based firm f.k.a. Benchmark Capital Europe, profited handsomely in the largest exit to date of a venture-backed social networking company.

The firm was the sole venture investor in San Francisco-based Bebo, a social networking site for students that AOL acquired last week for $850 million in cash. Three-year-old Bebo has its highest concentration of users across the Atlantic Ocean. And with some 40 million members, Bebo is the fourth-most visited site in Ireland, and the 10th most popular in the United Kingdom

Balderton, formerly an affiliate of Benchmark Capital, financed a $15 million first round for Bebo in May 2006. In exchange, the London-based firm got a 16% stake in the company, which is worth about $140 million under term’s of the AOL purchase agreement.

Barry Maloney, a Balderton Partner and Bebo board member called the acquisition “an exceptional return on our original investment.”

The exit comes nine months after partners of Benchmark Capital and Benchmark Capital Europe announced plans to separate their respective funds. European partners created Balderton as a separate European business with $1.5 billion under management.

However, Benchmark Capital did retain an ownership stake in Balderton. The Menlo Park, Calif.-based firm will receive a portion of the proceeds from the Bebo sale, said a Benchmark spokesperson, but did not quantify how much it stands to gain.

For now, partners are initiating investments for a new fund. Benchmark Capital VI closed in February with $500 million and is 20% larger than what the firm raised for its fifth fund in 2004. The fund will focus on West Coast opportunities, but has broad geographic flexibility, including Europe.

Balderton is also actively adding to its portfolio. Since Benchmark Capital Europe launched in 2000, U.K.-based partners have invested in more than 70 companies, including online betting exchange Betfair, video game publisher Codemasters and open source database provider MySQL, which Sun Microsystems bought earlier this year for nearly $1 billion. —Joanna Glasner