Index Ventures has closed its €400 million ($273 million) Index Ventures Growth I, the first such vehicle ever raised by a European venture capital firm. US venture firms such as Sequoia, Redpoint and Draper Fisher Jurvetson have all managed growth capital funds, which they developed to invest in more mature companies.
Index believes Europe is now ready for growth funds, given the start-up industry's maturity and the movement of traditional late-stage investors into larger deal sizes in both the technology and life science sectors.
Dominique Vidal, previously chief executive of Yahoo! Europe and co-founder of Kelkoo, who has joined Index to manage the fund, told PEO: “More companies have reached profitability and they are now targets for acquisition. As a founder, you have a choice to sell or to continue. If you continue you need money to grow geographically or to expand through acquisition.”
He said a minority investment from Index's fund would provide the capital required and allow a founder to sell some shares and “take some risk off the table”.
The fund is intended to complement the firm’s most recent vehicle, Index Ventures IV, which will continue to focus primarily on seed and early-stage investments.
The growth investment team will be led by Index co-founder Giuseppe Zocco. He will be joined by new team members Vidal and Guido Magni, formerly the global head of medical science in the pharmaceutical division of F. Hoffman-La Roche. The team will also be supported by Tony Zappalà, who has been with Index since 2005.
Vidal said the firm explained to investors there would be no distraction from Index's existing activity because of the new hires and re-allocation of existing staff.
Fundraising took just three months, was oversubscribed and the capital was raised entirely from existing shareholders.
Zocco and his team expect to make investments of between €20 million and €50 million in European-based companies. The team will also selectively consider Eastern European and US companies with plans to expand internationally. Technology and life science companies are the primary focus, with media, retail and clean technology opportunities also being considered. Deal flow will in part come from the intelligence built up in the Index early stage team.
Vidal said: “Sometimes you miss opportunities and see the company develop and now we can invest in them later. In other instances Index can qualify its approach in some sub-sectors and say we are going to invest either in early or later stages.” He said the firm would share expertise across the funding stages.
In the case of life science deals, particularly regarding companies with products in Phase II trials, Index can invest in listed companies. Vidal said this would be the exception in IT.
The fund can also do deals as large as €100 million, but in those instances it would look to partner. Again Vidal said this would be the exception, as part of the rational behind the fund is to avoid unnecessary deal syndication.