- UK venture capital firm Balderton Capital has raised $US375 million (£281 million) for its sixth fund to invest in Series A startups in Europe.
- The firm has successfully secured backing from the European Investment Fund – a major coup after the fund stopped investing in the UK after the Brexit vote.
- Balderton plans to invest more in France and continental Europe with its new fund and has made 10 investments already.
- Managing partner Bernard Liautaud said the UK’s future as a tech hub remains up in the air.
One of the UK’s biggest venture capital firms, Balderton Capital, has raised a sixth fund of $US375 million (£281 million) and bucked a post-Brexit trend by landing at least some of the money from an EU fund thought to have pulled out of the UK.
Balderton Capital, founded in 2000, has backed a number of successful startups such as transport app Citymapper, investment platform Nutmeg, and banking startup Revolut.
The firm will continue focusing on Series A startups with its new fund, which is backed by fund-of-funds, pension funds, and other institutional investors. Some backers are US-based but, in a growing trend, two backers are Asian. Balderton has made 10 new investments out of the fund to date, including AI firm Sophia Genetics and Zego, an insurance firm for gig economy workers founded by ex-Deliveroo employees.
“The focus is on European entrepreneurs who have a plan to build a really big company,” said Balderton’s managing partner, well-known French entrepreneur Bernard Liautaud. “What we mean by early stage is Series A – we want to be the first institutional investor, after seed and friends and family.”
A typical first cheque might be between $US5 million (£3.8 million) and $US10 million (£7.5 million) he added. Startups will need a product market fit and momentum.
It’s a “doubling down” on Balderton’s previous strategy, Liautaud said, because it’s working. He wouldn’t disclose returns on Balderton’s fifth fund, but pointed to the fact that the company’s portfolio startups have managed to raise substantial rounds after raising money from Balderton.
“When we look at our portfolio as a whole, they have raised $US850 million (£640 million). That’s an enormous amount,” he said.
Liautaud added that Balderton will likely invest more in continental Europe with the new fund.
“We are seeing more opportunities in France, and we will see Balderton investing more there than we have [previously],” Liautaud said. “It’s likely the relative part between the UK and continential Europe will balance out towards continental Europe than in prior funds.”
France has boosted its share of VC money in the last year, thanks to local successes like adtech firm Criteo, ridesharing firm BlaBlaCar, and big data firm Talend. In 2007, Liautaud’s own French firm Business Objects was acquired by SAP for €4.8 billion (then £3.3 billion).
Asked if he was confident in a post-Brexit UK, Liautaud replied: “I just don’t know. The base is very strong for entrepreneurs, that continues to be very good. Other regions will rise to the challenge, but I don’t think suddenly people will leave the UK.”
Liautaud added that London still had advantages over other European capitals, such as its strength in finance and as a hub for talent. Its future success, he said, would depend on talent being able to emigrate to the UK once it leaves the EU.
Balderton managed to win funding from the European Investment Fund
Balderton has managed to buck a damaging post-Brexit trend with its new fund, with new funding from the European Investment Fund (EIF).
The EIF is an EU entity which to date has handed billions to UK venture capitalists to encourage investment in European tech startups. It froze investment to the UK after the country voted to leave the EU, with multiple UK-based firms affected by the sudden halt. The EIF consistently denied it had pulled out of the UK, but several fund managers told Business Insider the fund had stopped investing.
How is it that Balderton subsequently raised money from the EIF?
According to one source, it’s likely that the EIF chose to invest in Balderton’s latest fund because it had already invested in the firm’s $US305 million (£228 million) fifth fund back in 2014. According to the source, the EIF will invest in funds where it already has commitments, but not in any firms newly applying for funding after the Brexit vote.
The EIF confirmed to Business Insider it had backed Balderton.
Asked how difficult VCs might find closing funding rounds after Brexit, Liautaud said: “I think it depends for which kinds of fund. Our fund is very clear in its focus, it’s early stage, it’s across Europe, we have invested across Europe for 15 years now. It’s well known, we have a track record, we are agnostic to the region.
“I think it’s harder for a fund that is a UK-only fund in terms of raising money from outside, maybe. Because we invest everywhere we haven’t seen an issue.”
The EIF’s rules mean it will only invest in funds which themselves back companies inside the EU and other designated eligible nations. That means a new fund that focuses on UK startups is unlikely to successfully raise money from the EIF – and it may partly explain why Balderton intends to shift its investment balance towards Europe.
After a summer of shame for US venture capital, Balderton is shouting about ethics
Silicon Valley has had a torrid time in the media this summer, with stories of harassment in venture capital and tech startups, and massively unethical behaviour such as Uber covering up a major data breach.
There have been fewer such stories in Europe, and Liautaud wants Balderton to proactively state its pro-ethics position. To that end, the firm is working on a manifesto as a kind of commitment to integrity and ethical behaviour in business.
“Missteps in ethics have led to enormous problems,” he said, pointing outside of tech to VW’s emissions scandal, and the Libor rates scandal in finance. “It results in a billion dollar fine, management wipeout, and a reputation built up for years that is completely tarnished.
“We think that ethics is a powerful force to create business.”
It sounds a little vague to an insider, but it involves pledging to act with the best behaviours, integrity, not putting pressure on startups and avoiding “all the bad behaviours” we’ve seen. Balderton separately has a harassment policy in place.
Balderton has also spent a year working on a guide to employee equity in startups, after studying practices in the US and Europe. The guide is available to the public, with startups able to use the document as a basis.
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