Benchmark Europe spins out of US parent

US venture firm Benchmark Capital’s European division is spinning out of its parent. The new firm, which has been operating largely independently for some time, will be called Balderton Capital.

Benchmark Capital’s European team is spinning out from its US parent, as its six-strong team of partners look to step out of the shadow of their US counterparts and scale up their operations on the continent.

The firm, which will be renamed Balderton Capital, will have almost $1.5 billion (€1.1 billion) under management across three funds, making it one of the biggest venture firms in Europe. The firm closed its latest $550 million fund in November, having previously closed a $375 million fund in July 2004, and a $500 million fund in May 2000.

The funds have invested in more than 70 companies, including some high-profile successes. Last year the firm sold its stake in Betfair, a UK online gambling exchange, generating a 40 times return. It has also backed fast-growing social networking site Bebo and open source software company MySQL.

An industry source said the European business was now operating almost entirely independently of the US office, and pursuing a slightly different strategy – the US arm has continued to focus on early stage deals, while Benchmark Europe’s investments in sports broadcaster Setanta and electronic payments firm Alphyra have involved companies at a more advanced stage of development. “The partners feel that they have built a great business in their own right, so they don’t need the Benchmark name any more,” the source said.

The firm is also expected to use its autonomy to scale up its operating infrastructure, as it looks to compete for deals right across Europe.

The timing of the move reflects Balderton’s wish to establish its new identity ahead of some lucrative exits later this year. MySQL, Alphyra and social networking site Habba Hotel are just three of the businesses reportedly considering a sale or flotation in the next few months.
Balderton follows in the footsteps of Lion Capital, the former European division of Hicks Muse Tate & Furst, which span out from its parent in 2005 following disagreements over the allocation of carried interest. A source said Benchmark’s US team had received a portion of the carry on previous European funds, but this has diminished to almost zero with the latest fund – now renamed Balderton I.

Balderton said it would retain close links with its former parent, and the two firms are expected to co-invest on future deals. “Our entrepreneurs will still continue to benefit from the same internationally oriented and networked group of investors,” said general partner Barry Maloney.

The firm has taken the well-trodden path of naming itself after the location of its London office – in this case Balderton Street in Westminster.

Benchmark, which was founded in the US in 1995, was one of the first Silicon Valley venture firms to cross over into Europe, opening a London office in 2000. It also opened an Israeli office in 2001, which is also expected to spin out as a separate entity at some point.