Balderton Capital, one of Europe's oldest and largest venture capital firms known for its investments in Revolt and Wayve, has raised a total of $1.3 billion in new funding across two funds: $615 million for its Early Stage Fund IX and $685 million for its Growth Fund II. VCs who spoke to TechCrunch reacted to the news with cautious optimism.
It's a further sign that European VC is recovering after several years of weakness following the zero interest rate policy and the COVID-19 bull market of 2021 and 2022.
Indeed, London-based Balderton pointed to research, based on data from Invest Europe and Cambridge Associates, which found that European venture capital funds have outperformed their U.S. counterparts over the past 10 and 15 years.
In an interview with TechCrunch, partner Suranga Chandratilake said the fundraising went relatively smoothly: “We raised[these funds]at a faster pace than we've done in the past. About 80% of our existing LPs are re-raising.”
He said the fund has also raised capital from a large, but unnamed, US-based institution. “We often hear that European venture is, globally, a relevant, solid and here to stay venture capital player in the industry. This of course seems like old news to me and to you, but it's amazing how long it's taken for that to really permeate everyone's mindset about the world, globally.”
In fact, European AI startups Mistral, Wayve and Poolside AI currently account for 18% of all VC funding in Europe, according to Dealroom. Balderton's funding follows funding from other European VC firms including Accel's European division, Index Ventures and Creandum.
In the past 12 months, Balderton has announced 12 new investments including Checkly, SAVA, Tinybird, Qargo, Huspy, trawa, Payflows, Scalable Capital, Lassie, Writer, Anytype and Deepset.
But the firm's sole European focus means it has largely missed out on investments in the “foundational” wave of AI startups emerging from Silicon Valley, such as OpenAI and Anthropic, which are backed by US giants that now have offices in London, including Andreessen Horowitz, Sequoia Capital and Lightspeed Venture Partners.
Balderton cited London and Paris as major innovation hubs, but chose not to back Paris-based Mistral, even though Frenchman Bernard Liautaud is the fund's managing partner.
“I think Mistral is a great company, and there's nothing bad about the team or the mission,” Chandratilake told me. “I think it's a tough investment for an early-stage focused VC like us, because it's a company that has to raise a lot of money to catch up with the leaders. If you're in an early stage company like that, you get really crushed. You don't have the staying power to write checks for hundreds of millions of dollars. And you get crushed on the cap table, you lose relevance, you lose your board seat, you have all kinds of problems. So it's not necessarily a good fit for a fund like us. That doesn't mean it's not a great company, it's just not a good fit for us.”
Is the strategy instead to wait and see how the AI space unfolds across the board and pick off startups? “We believe in fundamental models and we think there should be a healthy market for them. But the amount of capital required to build a good fundamental model is huge, (and) we think it's better suited to private equity firms or publicly traded hyperscalers that are printing cash in their core businesses,” Chandratilake said.
“We think you're going to see a lot of interesting companies being founded that use this technology in different ways to solve very specific problems, and that's where a lot of our capital will be deployed. Wayve is in our portfolio and they've raised the largest single round of funding of any European AI company, so we're pretty positive about AI.”
TechCrunch spoke to other venture capital firms to gauge industry sentiment on fundraising.
Brent Hoberman, founder of First Minute Capital (a seed fund with $400 million under management), said: “It's very encouraging for Europe, especially with the pure European focus, and the statistics that European venture capital is outperforming the US, riding on a heavily US-funded founding model, are valid.”
Suzanne Najafi, founding partner at BackingMinds VC in Stockholm, said: “It's great – it means more capital will be available to European startups, both at the early and growth stage. In terms of growth, we believe it's easier for growth-stage startups to raise capital here than to turn to US funds. That can still be important and add value, but now European growth funds can compete on a much larger scale.”
Another anonymous VC, who asked not to be named for fear of market repercussions, supported Balderton's decision not to invest in Mistral: “I believe Balderton has always taken a very practical, almost dispassionate view. They may not be the flashiest brands, but they are brands that will certainly give you your money back. They have probably missed out on hundreds of exceptional stocks over the years, but they have selected many good ones to create a diversified portfolio. I call them dispassionate decision makers. And big institutional investors want this, along with repeat business. Investing in Balderton is similar to investing in Revair, Highland and Verdun.”
But not everyone is so impressed. Andrew J. Scott, founding partner at 7percent Ventures, said: “What's important is that European Series A and above managers have the courage to back big bets on foundational technologies, not just software-layer applications where revenue is already established. If they don't, the US will control AI, space, and robotics for the next 30 years, just as it controls the web, search, and cloud computing today.”
This article has been updated to add another quote from the venture capital firm about Balderton's decision not to invest in Mistral.
