Why Balderton Capital’s New Early Stage Fund Is A Trend In Europe

Balderton Capital has raised a $305 million Series A fund focused on Europe. It’s a fascinating move and shows that European VCs are now finally convincing Limited Partners to invest in the sector, in a big way. Other VCs with older funds, built for a different era, will now look on with some interest. They will not be able to be as fleet of foot as this ‘smaller’ fund, and it answers a genuine need in Europe: Series A and follow-on funding.

Here is the reasoning.

Everyone knows there is a lack of capital available for Series A investments as it is much higher risk than coming in with a big cheque at series D stage. Balderton see a big opportunity here and now they have assembled a team that is very familiar with early stage investing. That’s not to say other European VCs don’t also have experienced teams, but in the past it has been unusual to see a fund of this size get stuck into early stage investing, outside of Index Ventures which has made a name for itself here.

The team tells us they are seeing more European companies than ever before – about 10,000 applications a year.

Balderton has done well out of its Series A investing with Bebo, Yoox, Natural Motion, MySQL, Lovefilm, so it clearly believes it can replicate its model and do it further down the food chain.

The fund was raised from existing limited partners such as university endowments and pension funds. A new entrant the European Investment Fund, the growth business financing division of the European Investment Bank, also joined. That means Limited Partners want to get on the band-wagon created by the US market. And let’s face it, EIF money is virtually free, who why not?

Balderton has built on a strong portfolio including Housetrip, Kobalt, Scytl, Talend, Wonga and Wooga. Some recent investments include European companies such as GoCardless, Lyst, Top10.com, and Vivino.

The latter companies all grew from the early stage.

VCs no long want to be cut out of early stage deals by other investors, which is why they are now reaching further downwards into early stage, as Balderton now is.

And it’s likely they will get some great deal-flow as there is so little competition at this end of the market.

Balderton has a clear brand name and unlike some VCs it’s messaging is crystal clear: We’re Series A and we’re Europe.