Why you shouldn't be too excited about Index's new €350M fund for early stage "European" startups


GigaOm Europe  reported this morning that Index Ventures raised another round of €350 Million to invest into early stage European startups. This is pretty great news – Index, along with Accel, is one of the few real Global investment firms that has both a strong presence in the US and in Europe. In New York, Index invested early on in Flipboard, along with Dropbox, Facebook, Etsy and more. In Israel, Index invested in Zend, a company who early on predicted the success of PHP and build a products and services for the language. More recently, they’ve funded iZettle, the”European Square” which is looking to bring a Square-like Mobile payment system to Europe. On the French side, they’ve got Criteo, Netvibes, and — well, that’s about it. Hmm.

Don’t get too excited France, Index hasn’t invested in France in over two years

May of 2010, Index announced their infamous investment in NormOxys. What’s that? You’ve never heard of NormOxys? You must not be up to date on your PharmaTech startups – NormOxys, a Boston headquartered company, does all its Pharma research in Strasbourg, France. I said it last year, Strasbourg’s amazing in PharmaTech[TC]. Nonetheless, before that, we’ve got Criteo in January of 2008 & Netvibes in May, 2006 – you can see everything in between on their portfolio page.
Using Index’s own filtering system on their portfolio page, you can distinguish between seed stage, early stage, and growth stage, as well as by location. Surprise surprise – the number of UK investments outweighs the number of investments in all other European countries combined – and that’s including Life Sciences and growth stage investments. Drill it down to just “early stage” and the investment numbers look pretty grim.

Photo Courtesy of Daily Mail

Their second biggest investment country, by the way, is Switzerland. So, an American’s intelligent takeaway from this is that the UK and Switzerland are pretty representative of “Europe.” You may hear a feint laughing sound creeping out of your speakers or headphones – that’s because anyone living in what I would call “real Europe” (i.e: the part of the EU where you don’t need to show a passport to enter/leave) knows that these are the two countries that would be voted most unpopular if Europe had a high school yearbook. I thought about going and talking to Index about it, so I looked up the nearest office to me in Paris – my choices were their London-based office or their Geneva-based office. Go figure.
I don’t want to totally cut them down, because they are obviously investing in great startups – and even distribution of investment money by location is obviously not practical or smart, but it’s worth nothing that they’re a lot closer to ignoring regions all together than they are to investing in a country just for the sake of encouraging growth. Their most popular investment, iZettle, is a Swedish company (Sweden is a different country than Switzerland, for the American readers) – I can’t wait to test their service once it launches in France. It’s currently available in Scandenavia and, oh, the UK, what a coincidence.

Local still wins – Everytime. Always.

So, 350 million euros is on the table, up in the air – unfortunately, Index’s tables and air are located in London, Geneva, Tel Aviv, New York, and the Silicon Valley. I think I’ll wait until Index comes to real Europe to start cheering for their new funds.

9 Responses

  1. Fred Destin

    It’s hard borderline impossible to run an early stage fund that’s multi office. London is the place of choice if you have a pan-European strategy. Index’ roots and back office are in geneva. Paris is 2-hours by Eurostar. Hence : it’s pure logic that they are where they are.

    • Liam Boogar

      Like I said, I don’t disagree. I think the point of the article is more than France (and other non Swiss/London)-based startups shouldn’t be expecting this money to trickle down into their pockets, at least not without a office transfer to the UK, like iZettle. Specifically for France, I was pointing out that, while I love what Index does for Europe (they’ve invested in almost every European success), they haven’t been very active in France, despite the 2-hour Eurostar ride, unlike Accel, who has invested in 2-3 French companies in 2012 (probably more that I can’t remember, mostly ISAI investments off the top of my head). So, French startups shouldn’t be expecting much attention, despite the 350 Million euros which Index claims in the press release will go to cities like Paris & Madrid.

  2. danmaz74
  3. Benoit Curdy

    Not your best piece, Liam. Real Europe vs Not Real Europe, really? London and Geneva are two financial hubs, which is exactly why their countries don’t want to be part of the EU. More importantly, many VCs like to be close to banks, which are their clients/partners after all. Also London is an hour away from Paris by plane and you can reach Geneva by train in 3:30. So you can leave for any of those in the morning, tell them what you think and be back for dinner. 
    Honestly, a VC that is ready to invest in a Swedish company, will invest anywhere in Europe. I’m all for giving VCs some tough love, the tech press seems never willing to point out what they do wrong, but I’m sure you can (and I’m sure you will) find better than geography to blame them.

    • Liam Boogar

      I think it’s a mistake (either on my part for poorly expressing it, or on yours for how you interpret) to think that this piece is whining about “European VCs don’t in France.” My point is: VC is local, and while Index may look at startups all over Europe, that 350M fund, that sounds tasty to a lot of European entrepreneurs, will largely be distributed to UK-based startups and Geneva-based startups. I’m not saying that’s not rational – in fact, it is. I’m just saying – don’t get your hopes up about that trickling down to Lisbon, Berlin, Italy, and Paris like their blog post would suggest.
      Then again, my assertion is based on their previous investments, and Martin Mignot made a great comment on twitter that “They haven’t invested it yet,” which is true. I will be very excited to see where that money first ends up.

  4. Nicolas Metzke

    Amongst the Index team you have some of the best European Entrepreneurs and smartest investors I have met to date.
    I don’t think that the 2h train ride between London and Paris presents a signicant issue. it’s the lack of “access” to the eco-system in Paris that stops many VCs. For seed and early stage investments you want to be close to your company, that is a fact, but you also want to optimze the synergies between your portfolio companies. Like with most (maybe all) VCs that aren’t in France, they have difficulties getting into the French system.

  5. Martin Mignot

    You don’t have all the elements (as we don’t announce all of our investments, especially seed ones) but your article is factually wrong. More generally, we’re super committed to France: although based in London, Dom and I are actively covering the geography and spend at least 2 to 3 days per month in Paris (often more). As it turns out, we’re there this Wednesday and Thursday if you want to meet…
    But I’ll let you judge by yourself: we’re having our summer party in Paris on the 10th July, where we’ve invited our closest contacts there. We’d love to have you around so that you can see we’re serious when we say we want to help build great European startups and strong local ecosystems!

    • Liam Boogar

      True – I am going only off of publicly available data, and I’m sure there’s an equally large amount of unannounced investments to off-set it.
      I’d love to meet up this week: shoot me an email at liam[at]rudebaguette[dot]com.
      Looking forward to being proven wrong (but not having to admit it).

  6. Pascal Mercier

    I am very excited about this new fund. I agree with Martin, Index is committed to France.
    PS: Index also invested in French company Best of Media.

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