Atomico has raised a $US765 million (£613 million) fund to invest in European technology startups, shrugging off any concerns that Brexit has made it harder for venture capitalists to raise large sums.
The London-based investment firm has now raised a total of $US1.5 billion (£1.2 billion) to back companies across Europe that have the potential to scale into billion dollar businesses.
Atomico, founded 10 years ago by ex-Skype CEO Niklas Zennström, claims that the Atomico IV fund is the largest fund of its kind in Europe.
Speaking to Business Insider at Atomico’s head office on New Bond Street in Mayfair, 51-year-old Zennström, said: “If you compare it to other pure-play European VC funds, it’s the largest.”
Atomico raised the new capital from wealthy family offices and pension funds across Europe, which have traditionally been risk-averse, according to Zennström, who cofounded Kazaa and two other companies before setting up Skype.
European startups have long-struggled to scale to the same size as their US rivals due to a lack of capital, according to Zennström. That’s largely because institutional investors in the US (particularly large pension funds) have been more willing to pump their billions into VC than their European counterparts.
“If the European pension funds allocated half a per cent of their assets to European venture, that funding gap would disappear,” he said. “We have all the ingredients here [in Europe]. We don’t need to raise money from the US or other places. There is plenty of capital here.”
Japanese tech giant SoftBank announced a $US100 billion (£80 billion) tech fund last October but that’s set to be invested worldwide and much of it is expected to go towards mergers and acquisitions as opposed to VC deals. Other household VC firms such as Index and Balderton have also raised large startup funds that European companies can access but none of them have been as big as Atomico IV.
Zennström, reported to have a net worth of $US1.3 billion (£890 million), said in September that he believes the next Facebook will come from Europe. This is partly due to increasing amounts of funding but a couple of other factors are also at play.
Five of the world’s top 10 computer science institutions can now be found in Europe (ETH, Oxford, Imperial, EPF, and TU Munich), according to an Atomico report published last November. The same report stated that there are more professional engineers in Europe now than there are in the US (4.7 million vs 4.1 million). There’s also an increasing number of business development mangers for startups to hire.
“For me, when I was recruiting people to Skype, it was hard to find experience at a fast-growing startup so you had to hire people from the US to come,” said Zennström. “Today, there’s many people working for Skype, Spotify, lastminute.com, King, Zoopla, whatever. They have learned the skills to scale a fast growing company.”
Although Europe doesn’t yet have an Apple or an Amazon-sized tech company, there are several firms that have grown into substantial technology companies in recent years. Enterprise software company SAP is now worth $US107 billion (£86 billion), while Spotify and Zalando are valued at over $US10 billion (£8 billion). Cambridge chip designer ARM was bought by SoftBank for $US32 billion (£26 billion) last year.
Innovative technology companies are being developed across Europe and not just in the traditional tech hubs of London, Berlin, and Stockholm.
So far, Atomico has invested in 85 companies, including the likes of “Clash of Clans” creator Supercell, which was acquired by China’s Tencent for $US8.6 billion (£6.9 billion) in June 2016, and Swedish payments firm Klarna, which has also grown to become a $US2.25 billion (£1.8 billion) business.
The new Atomico IV fund will be used to back approximately 25 startups across all stages over the next 3-4 years.
Nine companies have already received capital out of the new fund, including Austria-based Lilium Aviation, which is due to test a flying car prototype in the next few months.
“We like to back entrepreneurs who have big ambition. But also when they are about to scale,” said Zennström. “So we would come in when they have achieved a product market fit and the company needs to shift focus from innovation to scaling. That means we’re investing in Series A or later, say B or C.”
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