Index Ventures closes 2 funds, $1B for growth rounds and $650M for early-stage investing

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Make way for more money into the startup investing pool. Today, Index Ventures announced that it has closed a total of $1.65 billion in new funds — $1 billion that it plans to invest in later-stage, growth rounds, and $650 million that it plans to put into earlier rounds for smaller startups.

The venture fund is Index’s ninth; the growth round is its fourth since it was founded in 1996.

The funding is significant for a couple of reasons. Index is one of Europe’s (and America’s) more prominent venture capital firms, backing recent hits like Adyen, Dropbox, iZettle, and Zuora (all of which have now either gone public or, in the case of iZettle, been acquired), so its backing has become something of a signal for companies to watch (similar to a number of others, it should be noted), as well as setting a pace for investing choices (including who is doing the investing).

The funding is also notable because of the size of the funds. Index has raised $7.25 billion over the years, using that money to seed and grow hundreds of startups, and helping to fuel — alongside the growth of the internet and technologies like mobile — what has become a veritable tech boom over the last couple of decades.

But even within that longer trend, more recent years have seen an even bigger infusion of venture funding into the tech ecosystem, with outsized backers like Softbank bringing together syndicates of tech titans to bring in tens (and even hundreds) of billions of dollars into the mix.

The strong returns that the very biggest startups deliver — the world’s most valuable companies today are dominated by tech names — has led to even more money pouring into the sector. This latest $1.65 billion from Index is a leap on its previous growth and venture fund close: in 2016 it raised $1.25 billion ($550 million for venture and $700 million for growth), which at the time seemed huge and now seems almost modest.

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“The reason why it’s a larger amount is because companies are raising more money earlier. There is more capital, [but also] the opportunities are larger,” said Martin Mignot, and investing partner with Index, in an interview with TechCrunch. “Startups are going after larger sectors and a greater percentage of the GDP, and we believe that the size of outcome will get larger.”

“Operating thousands of scooters would not have been thought of as a venture-backed opportunity in the past,” added Mike Volpi, another investing partner at Index, in reference to Index’s investment in the scooter startup Bird. “It is now.”

“We are still in the very early innings of this,” Mignot said of the wave of transportation startups.

This is also leading to a big shift in how startups are evolving. The most highly capitalised are staying private for longer, because private money is much easier to come by than it was before: this means large growth rounds, more secondaries for investors to get their returns, and longer cycles before “exits.” In that vein, it’s notable that Index has raised $1 billion for growth investments.

But while some VCs are now looking at strategies specifically around secondary sales, this will not be a route Index plans to take.

“There might be a sliver of secondary, but not much. We have no plans to do a secondary fund,” said Volpi. “That is not our focus at this point, nor for the foreseeable future.”

Index says that the growth money in this fund will be going to some of the biggest names in its stable already, which includes the likes of Aurora, Bird, Deliveroo, Elastic, Farfetch, Robinhood, Revolut and Slack. (Another way to look at this: if you didn’t already know about the startups in this list raising more money… you do now.) Some of that it seems will also involve helping its portfolio companies work more closely with others in the Index network and sphere of influence.

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On Slack, for example, Volpi notes, “One of Slack’s key growth areas is Europe, and so we’re doing a number of things outside of traditional funding to help with those advances.”

Index now has 21 people on its investment team, but with only one woman among its nine investing partners — Sarah Cannon.

“It’s a valid problem that many firms are trying to address,” Volpi said of lack of females at the top of Index’s pyramid. He said Index’s approach is to add more women at all levels. “Seven out of our last 12 hires have been women,” he said. “The pace of hiring means we will not change overnight, but we’re happy with the progress and eventually will see us shift to 50-50, as it should be.”

Source: TechCrunch

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