Again in April 8, 2021 Index Ventures, one of many only a few ‘unique gangsters’ of the European VC scene, stated it was variety’ve going ‘again to its roots’. It announced the launch of a brand new $200 million devoted seed investing car dubbed ‘Index Origin’.
Now, when you forged your minds again, this was in the course of the white-heat tech bull run of final yr when valuations hit the roof and startups hardly ever needed for funding. Due to this fact, Index’s new fund identify thus paid homage to the agency’s origins as a seed fund, given that previously it had backed corporations like Robinhood, Figma, Deliveroo and Smart, all on the seed stage.
Throughout the previous couple of years – regardless of the pandemic, and in some methods due to it – there was a substantial amount of competitors for cap tables on the earliest levels of startups. However with a worldwide recession looming within the subsequent yr, a Crypto ‘nuclear winter’, and exterior elements just like the battle in Ukraine, you would possibly suppose that traders like Index can be drawing of their horns.
Not so. Maybe paying homage to the age-old view that the perfect startups are born counter-cyclically, Index is at this time upping-the-anti with a second “Origin Fund” which shall be a $300 million Seed fund, Sure people, that’s $100m bigger than Origin I final yr.
With Index Origin II, Index is now investing from three funds totalling $3.2bn. Index’s different funds embrace early-stage fund Index Ventures XI ($900m), and progress fund Index Ventures Progress VI ($2bn). Meaning 75% of Index’s preliminary investments are Seed or Collection A.
The brand new Origin fund additionally seems – not unexpectedly – to be geared to the extra trendy atmosphere the place co-funding for startups also can come from such disparate sources as solo GPs, Angels and lots of present or exited entrepreneurs.
Index says it hopes to repeat the success entrepreneurs such Dylan Discipline, for whom Index wrote his first verify.
For instance, Index is banking on the Macro financial downturn producing the subsequent Airbnb, Adyen, Slack, Skype, Google and Spotify — all of these new born throughout wider financial slumps.
It subsequently plans to put money into any vertical of curiosity and in any geography (primarily the USA and Europe, though it’s not explicitly restricted to these markets).
I requested, why double-down on early stage for Index Ventures?
Nina Achadjian, Index Accomplice based mostly in SF advised me by way of electronic mail: “All through our expertise as early stage traders, we realized that there’s a necessity for a unique sort of early stage fund. Entrepreneurs have lengthy advised us that at seed stage, they’ve been break up between selecting well-established traders which have giant assets and a giant community and seed funds that solely deal with seed stage.”
The concept, she stated, is to mix these two approaches: “With Index Origin, we needed to make it potential for founders to get the perfect of each worlds – the assets they should develop quick, mixed with the early-stage experience and fingers on strategy. We all know it takes a village, which is why we take a collaborative strategy at seed investing. We proactively herald seed funds, solo GPs and angels to co-invest with us in order that collectively we will present entrepreneurs with the absolute best help community and probability of success.”
Nonetheless, why increase an even bigger fund than the earlier one? “The technique we took with Origin I when it launched final yr has resonated very well with founders. Having invested in 32 corporations since its launch, we determined to lift a brand new fund and improve the scale to construct on this momentum,” stated Achadjian.
How did Index discover it increase cash on this ‘downturn’ atmosphere?
Danny Rimer, Accomplice based mostly in London stated, (additionally by way of electronic mail): “Index is all about conviction. Because of protecting the principle factor the principle factor, we’ve taken a really contrarian strategy in relation to investing in crypto and China, and so, not like our friends, we haven’t invested in these areas. Moreover, LPs actually perceive the worth proposition of Index Origin as a fund that provides the perfect of each worlds to entrepreneurs.”
Is Index seeing extra angels and former Entrepreneur/operators, in seed rounds in Europe and the US?
“We see extra skilled angels becoming a member of rounds throughout all geographies, and that’s a very good factor. Constructing an organization requires totally different experience, and having angels of various backgrounds is a major benefit. It’s why we’ve arrange Origin II as a extremely collaborative fund that’s open to working with seed funds, solo GPs and angels,” stated Rimer.
How is the early stage atmosphere within the US? And in Europe? What’s your prediction for subsequent yr?
Rimer added: “In contrast to the expansion levels, the place funding tempo has slowed down dramatically, at early levels we’re seeing wholesome exercise in all of our areas. By way of areas of focus, we proceed to double down on our core areas together with video games, marketplaces, enterprise/cloud/SaaS and vertical SaaS, AI, safety, fintech & open supply.”
Does Index plan to do any crypto investments out of this new fund?
Rimer: “I wouldn’t rule that out, however as I wrote not too long ago, for us, the lion share of corporations we’ve seen so far on this sector aren’t ones we’d put money into. We see blockchain for what it’s: a robust new know-how, however not the brand new web. Our hope is that given all the things that has occurred to this sector this previous yr, we’ll deal with corporations that need to construct actual worth for customers, fixing an actual ache level somewhat than one thing speculative in nature.”
In the previous couple of months Index expanded with workplace opening in New York and employed a brand new associate in Tel Aviv.
