Index Ventures has today announced a new €350m ($442m) fund as it looks to expand its portfolio and reel in a slew of new tech startups across the US, Europe and Israel.
Index is headquartered in Geneva, Switzerland, though it also has offices in London, Jersey and, fairly recently, San Francisco. Its previous European investments include a broad compendium of well-known names, such as Last.fm, MySQL, and Skype, whilst other emerging tech companies from around the world such as Boku (see previous coverage), Flipboard, Path, ASOS, SoundCloud and Moo.com have also received cash injections from Index.
This latest fund constitutes part of a whopping €1bn raised by Index over the last year, with separate funds in place for the ‘Growth’ and ‘Life Science’ sectors.
As with many of its previous investments, there will be a strong European focus as it looks to cast its investment net far and wide, with London, Berlin and Stockholm key geographies, though New York City, San Francisco and Tel Aviv will also be on its radar.
Last week, The Next Web caught up with Index Ventures’ Danny Rimer – who joined Index in 2002 to set up the London office – to get the lowdown on this latest fund and what the plans are for it.
“This is our sixth fund, and for about five funds now the size has been the same,” says Rimer. “While the appeal would be to raise more because of demand, our view has been that we want to maintain the same size to continue to make great returns for our investors.”
As with all its previous ‘new’ funds, this latest €350m will be aimed exclusively at emerging tech firms. But rather than firing out money left, right and center to consume the entire fund, Rimer says that they typically invest around €200m – give or take – in a range of companies, with the remaining amount ploughed back into those that perform best subsequent to the initial injection. “This means there’s room for them, over time, so you don’t have to go to previous funds to finance their future,” remarked Rimer.
If you didn’t already know what an IPO was, you probably learned following Facebook’s recent floatation which broke all kinds of records, hitting headlines around the world. Previous to Index, Rimer worked as the underwriting analyst for a number of big tech companies going public, including Netscape and the mighty Amazon, so he’s probably in a good position to determine which of Index’s companies are approaching an IPO-ready stage…if they decide to float, that is.
“There are probably about 20 companies in our portfolio now that are sort of IPO-ready over the next 12-24 months,” says Rimer.
“Value is in the eye of the beholder,” says Rimer. “A lot of folk comment on valuations without really understanding it. And specifically in Europe, I don’t think people spend enough time thinking about how important these companies are and what the cash flow looks like, what the business model and lifetime value of the customer really means, and how they should be valued accordingly. It sounds like a big sticker price, but when you think about the number of users…I mean, is Instagram worth 1.5% of Facebook at today’s market price? Yeah, I can make a very strong reason why that’s the case.”
Moving forward, Rimer says that Index is looking for outstanding European and Israeli companies to grow as global “category leaders”, such as Boku, Criteo, Farfetch, Housetrip, King.com, Mind Candy, Moo.com, Oanda, OpenX, SoundCloud and Viagogo. Index is also looking to invest in companies capable of dominating large national and regional markets (e.g. Funding Circle, Just Eat, Ozon, Photobox, Viagogo).
With €350m to filter through to early-stage innovators, Index also points to the broader economical implications of this, with a huge potential for creating new jobs. Indeed, we’re told that in its currently portfolio alone, there are more than one thousand open positions.
Throw into the equation Index’s claim to having “at least twenty European born companies who are building significant businesses”, with combined 2011 revenues of €1.3b last year, then this latest fund hopefully bodes well for the European startup ecosystem.
Feature Image Credit: Alf.Melin | Flickr