IDG Ventures Europe, which began operations in November last year, has formally announced its existence and the fact that it is about to make the first investment from its $100 million fund.
The fund, as the name suggests, is targeted at investments in Europe and will be managed by three partners Ajay Chowdhury, Kit Gould and Chris Smart. An associate from IDG Ventures San Francisco office has joined them and Chowdhury notes that he expects that two further analyst/ associates will join the current team going forward.
IDG Ventures Europe is backed by and managed at arms length by International Data Group Inc and has a remit to act as a financially motivated venture capitalist rather than a corporate venturer. The reason for this emphasis can perhaps be traced to the early 1990s. In 1992 a similar fund to that now operated by IDG Ventures Europe was set up in China. The principal reason for this venture was that at that time although International Data Group was making profits on its Chinese businesses it was unable to take those profits out of the country. So it decided to invest them in China and that fund is now worth $200 million.
Similar funds to that started in China were set up in the US in 1996. These two funds are worth in the region of $180 million today.
Chowdhury notes that IDG Ventures Europe will invest $1 million to $4 million in the first institutional round of funding secured by a company and with follow on investments can commit up to $8 million per company. Deal flow is expected to result in investments of $20 million to $25 million in the first year. Deal sourcing is encouraged to occur within the International Data Group itself and to this effect IDG Ventures Europe has set up a board which is composed of CEOs of IDG’s European businesses.
Incentives to bring deals to the corporate parent are likely to be largely based around finder fees. Chowdhury concedes that a share of the carried interest in the fund might be possible in exceptional circumstances where, for instance, subsequent involvement in the investment by the introducer of the deal was required.
Chowdhury emphasises the main areas of interest for the fund, which does not have to invest in businesses related to that of its parent, as including; all technology (except biotech), wireless applications, quality service monitoring IT, enabling technologies and general IT services.
In addition, IDG Ventures Europe seeks to co-invest. In particular Chris Smart has plenty of VC connections for maximising co-investing opportunities. Smart was previously managing director of Cambridge Research and Innovations Ltd. Chowdhury was the president and CEO of NBC Internet Europe. Chowdhury joined that company early last year when it had just raised $20 million to expand into Europe. With the subsequent market collapse Chowdhury chose not to pursue that goal.
And prior to joining IDG Ventures Europe Kit Gould was the president and CEO of International Data Group UK.
International Data Group has global revenues of $3.1 billion and specialises in IT media, research and expositions.