European VC, Balderton Capital, has raised $1.3 billion across two funds, signaling the growth of the European VC industry. The funds, Early Stage Fund IX and Growth Fund II, received $615 million and $685 million, respectively. This news has been met with cautious optimism by the VC community. Balderton Capital’s raise is evidence that European VC funds have outperformed their US counterparts over the past 10- and 15-year periods, according to research by Invest Europe and Cambridge Associates.
Balderton Capital’s partner, Suranga Chandratillake, explained that the fundraise went smoothly and that 80% of existing limited partners reinvested. The firm also secured funding from a large US-based institution, highlighting the growing recognition of European venture as a solid and permanent part of the global VC industry.
European AI startups, including Mistral, Wayve, and Poolside AI, now account for 18% of all European VC funding, according to Dealroom. Balderton’s recent fundraise follows similar raises by other VCs in Europe, such as Accel’s European arm, Index Ventures, and Creandum. In the past year alone, Balderton has announced investments in 12 new startups, including Checkly, SAVA, and Tinybird.
However, Balderton’s focus on Europe means that it has missed out on investing in the foundational wave of AI startups in Silicon Valley. Giants like Andreessen Horowitz, Sequoia Capital, and Lightspeed Venture Partners, all of which now have offices in London, have backed these companies. Despite having a Frenchman as the managing partner, Balderton didn’t opt to invest in the Paris-based Mistral. Chandratillake explained that while Mistral is a great company, it would require a significant amount of capital to compete with industry leaders. As an early-stage focused VC, Balderton felt that it wasn’t the right fit for their fund.
Instead, Balderton’s strategy is to observe the AI field and invest in emerging companies that use the technology to solve specific problems. They believe in foundational models but acknowledge that the capital required to build them is better suited for private equity firms and public companies with substantial cash flow. Wayve, which has raised the largest single round of any AI company in Europe, is an example of a company that aligns with Balderton’s investment strategy.
The raise by Balderton Capital has garnered mixed opinions from other VCs. Brent Hoberman, founder of firstminute capital, sees it as encouraging for Europe and highlights the strength of European VCs. Susanne Najafi, Founding Partner of BackingMinds VC, believes the raise will make it easier for European startups, especially in the growth stage, to raise funds locally. However, Andrew J Scott, Founding Partner of 7percent Ventures, urges European Series-A plus managers to back big foundational technology bets, as the US currently dominates the AI, space, and robotics industries.
Overall, Balderton Capital’s recent fundraise demonstrates the growth and potential of the European VC industry. With a focus on emerging AI companies and specific problem-solving applications, Balderton aims to make strategic investments that align with their investment strategy. However, it is essential for European VCs to back foundational technology bets to ensure Europe’s competitiveness in key industries.
