Index goes big with $690m growth fund

After a bumper 12 months, European investment group Index Ventures is seeing out 2011 with a bang: by closing a new €500 million ($690 million) fund.
The company has just announced its new growth fund and says it will use the fund to make significant bets on fast-growing companies that are verging on greatness.
“Our approach is in identifying companies that are growing fast and have more proven business models than the firm’s traditional venture investments,” Index partner Ben Holmes told me.
“That involves a minimum of €10 million, going up to €50 million and more in some cases. These are companies that we think can be leaders in their market and have international ambitions.”
But given the size of the investments it plans to make with this money, few of the moves are likely to be a shock — in fact, many of them could well be follow-ons in businesses that Index is already in. Just a couple of months ago it was part of a recent $100 million follow-on round for Russian online retailer, for example.
That means we could see moves to put more into likely candidates such as French ad firm Criteo, e-commerce firm Trialpay and British children’s games company Mind Candy.
For Index — which has developed arguably the strongest track record in Europe over the past decade by backing businesses such as Skype, MySQL and Playfish — this is an attempt to really crank up its hit rate and underscore its reputation.
Saul Klein by Joi Ito (CC Licensed)“In the last 12 months we’ve had over 15 exits,” Index partner Saul Klein explained. “For us, that’s unprecedented. It includes three IPOs in Betfair, Aegerion Pharmaceuticals and RPX and trade acquisitions like and Lovefilm.”
But he thinks there is more coming down the line.
“One thing we’ve seen is the balance sheet of technology companies. Well, there’s a lot of cash sitting around. Both at a corporate and, ironically, at a government level, there is a massive appetite for investing in innovation.”
In terms of what it means for Index in the medium term, both Klein and Holmes suggest it’s business as usual: an international approach that is focused on taking European companies global, or helping American companies crack the EU market. This has stepped up in the last year, particularly with the opening of a San Francisco office, but the new fund will have its limitations.
In practice that means while the new fund will allow them to spend more time in places they already watch closely (they pinpoint Tel Aviv, Berlin and the Baltic as areas where strong opportunities are appearing) they will not be using it to broaden into the Asian market.
So, one more question: when is the money going to be in play?
Turns out it already is.
This new fund is where Index found the cash to lead the recent $250 million round in Dropbox, a prime example of the sort of deal that the company wants to do more often.
“Our position is somewhat unique,” says Holmes. “Our core strategy is to find European companies attacking a global opportunity, and American investments where we have existing relationships with entrepreneurs, expertise in particular areas or they are interested in international expansion.”
“We want to capitalize on what we’ve done over the last few years, rather than expand the footprints.”