Britain's answer to Silicon Valley's money men
London's Balderton Capital, the power behind Betfair and Wonga, is pulling the centre of gravity across the Atlantic
Wednesday 02 April 2014
Few outside the tech scene will have heard of Balderton Capital, but most people will have heard of at least one of the companies the London-based venture capital firm has backed – LoveFilm, Bebo, Betfair and Wonga.
The investment company, a giant of the European tech scene, is run from an office building in Balderton Street, just off Oxford Street. It has $2.2bn (£1.3bn) in funds under management and the start-ups it has backed in its 14 years of operation are today worth more than $10bn.
Yesterday it raised a new fund – with $305m to invest in small European technology businesses that it hopes will one day be the next Facebook or Google.
"Balderton is one of the key VCs not just in London but Europe and internationally," said Mike Butcher, editor at large of industry website TechCrunch. "European entrepreneurs look to them to help grow and scale to Silicon Valley."
Together with a handful of others, Balderton is powering the current wave of technology- focused entrepreneurialism sweeping across Britain, and is arguably the closest thing Europe has to Sequoia Capital – the Palo Alto investment firm which has helped spawn giants that include Apple, Google, YouTube and WhatsApp.
"As it is now, [Balderton] has one of the best portfolios in Europe, if not globally," Mr Butcher said.
The firm was originally established as the European office of Silicon Valley investor Benchmark Capital, but was spun out in 2007 by the office's founder, Irishman Barry Maloney.
Only three venture capital firms investing in European technology can rival its size – Accel Partners, with €1.5bn (£1.24bn) under management, Index Ventures, which has €2.5bn invested, and DFJ Esprit with $1.1bn under management.
But what sets Balderton apart is that it only invests within Europe, with around a third of its money going to the UK.
"We absolutely believe in Europe," said Bernard Liautaud, a general partner at the firm.
"We see almost 10,000 projects a year. It's grown substantially and the quality of the projects is a lot better than we saw five years ago."
Balderton invests at the very early stage of businesses, and prides itself on picking out winners.
The firm's latest success is NaturalMotion, the Oxford-based games developer whose Euphoria motion engine was used in Grand Theft Auto. The company, which Balderton first spotted in 2006, was bought by the US studio Zynga for $527m at the start of this year.
"By having a clear focus on early stage investments we believe we are creating a substantial competitive advantage," Mr Liautaud said.
Perhaps surprisingly, Balderton's investment team is made up of just 11 people, all of whom have had a hand in building technology businesses themselves. The firm's latest recruit is Suranga Chandratillake, the founder of video advertising firm blinkx, who joined in January.
Balderton lured Mr Chandratillake back from Silicon Valley, where he had been running blinkx for 10 years; when he joined, Mr Chandratillake said that one of the draws was Balderton's ability to "bring the US mindset to European venture exceptionally well".
Like its counterparts across the pond, Balderton invests time as well as money in start-ups. Each partner who leads an investment, which typically ranges between $3m and $5m, also takes a hands-on role, helping teams navigate everything from legislation to product design.
Partners are limited in how many companies they can take on, so as to be fair to their entrepreneurs.
Balderton has already begun investing its latest pot of cash, the fifth it has raised, including investments in two London start-ups – a hotel search engine called Top10; and GoCardless, which lets small businesses accept direct debit payments.
"In a fund we're looking for a couple really great hits – we need to have an investment that can return 10 or 20 times what we put in," Mr Liautaud said. "Then you have some more, that do three to five times; then you have a number where you're going to lose money."
Mr Liautaud said that the technology industry is seeing a fundamental shift away from Silicon Valley and towards a new centre in Europe: "We don't think it's just a moment in time, we think it's a fundamental trend. Every year there are more companies coming out [of Europe] who have grown to substantial valuations."
And within Europe, Mr Liautaud said, "Right now London is leading the way."
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