Balderton Capital, an older, larger European venture capital firm known for its investments in Revolt and Wayve, has secured an additional $1.3 billion over two funds. The Early Stage Fund IX will receive $615 million, while the Growth Fund II will receive $685 million. The announcement was met with cautious optimism from the VCs TechCrunch talked with.
It's also another sign that European venture capital is coming up after a slow couple of years following the ZIRP and post-COVID-driven bull market of 2021 and 2022.
Indeed, the London-based Balderton cited research showing that European VC funds beat VCs in the United States over 10- and 15-year periods, according to statistics from both Invest Europe and Cambridge Associates.
In an interview with TechCrunch, partner Suranga Chandratillake stated that the raise went rather smoothly: "We raised [these funds] faster than we've ever raised them before." It was around 80% reupping of existing LPs.
He said the fund has also raised from a large, but unnamed, U.S.-based institution: "What we've heard a lot is that European venture feels like a proper, solid, here-to-stay part of the industry VC globally, which obviously seems like old news to me or to you, but it's amazing how long that takes, in a global sense, to really permeate into everybody's way of thinking about the world."
Indeed, European AI startups Mistral, Wayve, and Poolside AI currently account for 18% of all European VC funding, according to Dealroom. Balderton's fundraising follows that of other VCs in Europe, including Accel's European branch, Index Ventures, and Creandum.
Balderton has announced 12 new investments in the last 12 months, including Checkly, SAVA, Tinybird, Qargo, Huspy, Trawa, Payflows, Scalable Capital, Lassie, Writer, Anytype, and Deepset.
However, due to its concentration on Europe, the firm has mostly missed out on investing in Silicon Valley's "foundational" wave of AI startups, such as OpenAI and Anthropic. These have received backing from major US firms such as Andreessen Horowitz, Sequoia Capital, and Lightspeed Venture Partners, all of which now have London offices.
Balderton has identified London and Paris as significant innovation hubs. Despite having Bernard Liautaud, a Frenchman, as the fund's managing partner, Balderton chose not to finance the Paris-based Mistral.
“We think Mistral is a great company and there’s nothing negative about the team or their mission,” Chandratillake told me. “We think it’s a hard investment for a more early-stage focused VC like ourselves because it’s the kind of company that will have to raise huge amounts of money to stay up with the leaders. If you are early in those sorts of companies, you get really squashed. You won’t have the firepower to keep going, to write checks of hundreds of millions of dollars. And so you get squashed in the cap table, you lose your relevance, you lose your board seat, etc., etc. So it was not necessarily a good fit for our kind of fund. That doesn’t mean it isn’t a great company. It just isn’t a very good fit for us.”
Is the strategy instead to monitor the entire AI area and target developing companies? "We believe in core models, and we think there should be a large market for them. However, we believe that the amount of money required to establish a great fundamental model is massive, [and] better suits] private equity firms, hyperscaler public corporations that are printing cash in their core businesses," Chandratillake stated.
"We believe there will be a lot of intriguing firms formed that leverage this technology in various ways to solve very specific challenges, and that is where a lot of our money will go. Wayve is in our portfolio, and they raised the largest single round of any AI firm in Europe. So I believe we have a positive attitude toward artificial intelligence."
Brent Hoberman, founder of firstminute capital (a $400 million AUM seed fund), stated, "It's very encouraging for Europe, especially the pure Europe focus and the stats showing Euro VCs outperforming the U.S." Europe riding on top of lavishly supported foundation models from the United States is also valid.
Susanne Najafi, a founding partner at BackingMinds VC in Stockholm, said: "It's fantastic. More money for European entrepreneurs, both early and growing. In terms of growth, we believe it will be easier for growth firms to raise rounds domestically rather than relying on investors from the United States. That may still be relevant and create value, but European growth funds can now compete more effectively."
An anonymous VC supported Balderton's choice not to invest in Mistral, stating that Balderton has always maintained a pragmatic and cool approach. They may not be the most expensive brand, but they are unquestionably the most profitable. They probably missed out on hundreds of outliers throughout the years, but they chose many excellent ones to build a diverse portfolio. I would describe them as sober decision-makers. Big institutional investors desire this, as well as recurring business. Investing in Balderton is similar to investing in Revaia, Highland, and Verdane.
However, not everyone is as impressed. Andrew J. Scott, founding partner at 7percent Ventures, stated, "What's crucial is that European Series A-plus managers have the guts to fund genuinely substantial core technology bets, not just software layer apps with known revenue. If they don't, the United States will control AI, space, and robotics for the next 30 years, just as it does today with the web, search, and cloud computing.