European VC isn’t underfunded

According to one of the most influential VC houses in Europe, Index Ventures, European VC is not underfunded. The London and Geneva-based firm, made famous by its canny investments in Skype and Betfair closed its fourth fund aptly named, Index Ventures IV, bringing the firm’s total capital under management to more than €1bn.

General partner at Index Bernard Dallé disagrees with the newspaper fodder claiming that European VC is “chronically underfunded”. The €350m taken into Index Ventures IV was raised in two months. The first right of refusal was given to embedded investors and then a small group of new investors were allowed to join. The new investors were US and Asian institutions, college endowments, foundations and pensions. According to Dallé, “The fund was capped at €350m because that is the size that the team was able to cope with at this time.” He adds that the European VC market feels good at the moment. “It is not underfunded or overfunded. Some deals are competitive if there are high profile management teams that have worked with private equity managers before but generally valuations are reasonable in the space. I think European venture looks healthy but if any sector doesn’t have enough sources of capital it is in very early stage and seed. But at Index two thirds of our investments are in seed or series A stage businesses.” David Rimer, a another general partner with Index agrees, he said: “We are excited as ever to be tapping into the growing talent pool we see in Europe.”

The group’s new fund will pursue the firm’s strategy of partnering with highly talented entrepreneurs to build global companies in the information technology, life science and green tech sectors. The firm expects its first investment at the beginning of the second quarter in 2007 and its second investment to follow quickly behind. Though Dallé refuse to give names with the line “a deal is never done until it’s done”, he did tell EVCJ that both investments are in the Internet sector.

Since its inception in 1996, Index Ventures has backed entrepreneurs who have taken on incumbents and built seminal companies in a number of growth sectors including: open source software companies such as MySQL, Trolltech, Zend and Pentaho; broadband and VOIP companies such as Virata, Skype, FON and Rebtel; Internet service companies such as Betfair, Oanda, Last.fm, SpotRunner, Lovefilm, Stardoll and Netvibes; and life science companies such as Genmab, ParAllele Biosciences, BioXell, 7TM Pharma, Addex Pharmaceutical and PanGenetics.

“Everything we do is about helping entrepreneurs move quickly to become global market leaders,” said Dallé. “Success for European companies has depended on their ability to extend their geographical reach quickly and cost-effectively. We invest in entrepreneurial teams going after global opportunities, whether they are in Tallinn, Toronto, Los Angeles, London or Madrid.”