Index Ventures has closed its third fund at $300 million. The investor is based in Switzerland and invests throughout Europe in technology and biotech start-ups. It now manages $500 million. The new vehicle will place a greater emphasis on early stage deals than Index’s previous funds.
Index Ventures II represents an evolution of the investment strategy of the firm’s previous funds. It will continue to invest in IT (around two thirds) and life science (one third), although according to Neil Rimer, general partner at Index, this may slide to 50:50 depending on the opportunities available. The geographical scope will remain focused on Europe. Rimer said a few (around 20 per cent) of the deals may be sourced from Israel and the US but only when the company had a strategic need for a European backer.
The VC will also continue to develop relationships with US corporates and VCs that offer a strategic benefit to the firm and its portfolio companies. Cisco Systems is one such company. Mike Volpi, the company’s chief strategy officer and a member of Index’s advisory board, said: “The Index Ventures team combines an understanding of new technologies, direct experience in the European markets and US venture style approach to supporting start up companies. Our relationship has been very productive.”
The principal difference in this fund will be the increased focus on early stage deals. Rimer believes the unpredictability of exits means early involvement, where a greater stake is obtained at a lower price, currently offers better returns. Rimmer says: “At the moment what you think is a late-stage investment can turn out to be early stage with no exit for 24 months.” The greater capacity of the fund will also enable Index to make larger follow-on investments than before, he anticipates this will average around $15 million over the life of a company.
The fund held its first closing at the beginning of the year after only a few months courting investors. Index announced it had raised $191 million at that point from a group of international institutional and corporate investors. Investors include Boeing, BTV, Cisco Systems, CalPERS, Invesco, Liechtenstein Global Trust, Partners Group, Proventure, Standard Life,UBS Capital, Unigestion and Venture Capital Management. The final close is the result of targeting a number of individual investors who Index was keen to bring on board.
The company’s last fund, now fully committed except for follow-on investments, raised $180 million in March 1999. Prior to that the firm invested its first fund of $17 million, which has reportedly generated returns over four times its original size. New investors attracted to the current fund include Eurazeo, Frank Russell Associates, HarbourVest, Oberlin College, Oracle Corporation and Spelman College.
The fund already has one undisclosed company in its portfolio and is moving towards its second financing. In June Index Ventures participated in a GBP11.5 million financing round for Mediasurface, a UK-based management software company. On-line recruitment service StepStone, another Index company, recently announced its merger with New York Times Digital. Other investments this year include Cellzome, a German functional proteomics company.