This is part of a series looking at some of Europe’s best and brightest venture capital firms. We wanted to examine the psychology of VC investing by looking at the key players, who and what they invest in, how much they are investing and how founders can improve their chances of getting in front of them by learning more about them.
We’re not only looking at the giants or the highly exclusive, just as VC’s aren’t always looking for the best qualified or most polished start-ups. The start-up eco system in London and the UK, just as in any other business network, is primarily built upon relationships between people. It’s worth bearing this in mind as we look at Balderton; a brains trust with a long term approach whose backing of a company is very close to a guarantee that that company will be successful.
Balderton are one of Europe’s largest VC funds, and prefer to be the first institutional investor in. Balderton are all about hard work, charisma, ingenuity, and metrics with just a dash of rocket science.
Balderton Capital, founded in 2000 was originally formed as the European Investment arm of Benchmark Capital, based in Silicon Valley, and one of the world’s largest venture firms. Although the two maintain close ties, Balderton officially became a separate entity in 2007.
Balderton is one of Europe’s largest VC’s, managing around $2.3bn US dollars, the bulk of which is drawn from “university endowments, charitable foundations and pension funds”. Balderton V, the most recent fund, raised £250m, four years after Balderton IV completed a raising of £285m. The most recent funds have been raised with the goal of backing technology companies in the UK and Europe, however Balderton has been known to make investments elsewhere, such as Asia and in the US.
The firm has made over 100 mainly early stage investments to date, including into Betfair, MySQL, Bebo (sold for £850m to AOL), LoveFilm, GoCardless, Kobalt and Lyst. The company aren’t concerned about which sectors they invest into, provided there is significant opportunity to disrupt an addressable market which has the ability to develop beyond £1bn. That said, the firm does not invest into Life Sciences or Cleantech.
They are fussy about who they do business with, however; their entire team know what it’s like to build businesses as a founder, all having been successful entrepreneurs in their own right. They are looking for those same qualities in the founders they work with; great people, “offering a compelling value proposition, in a large market, with a clear plan, to build a profitable organisation”, as it says on their website.
Balderton don’t aggressively market themselves online or attend hundreds of “Silicon Roundabout” events, but they do have some visibility, finding different ways of engaging with start-ups. They are influential, serious minded, hard-working and well qualified, with an incredibly strong and well established network of contacts all over the world. Uniquely for a VC firm, all team members function as equal partners i.e. all partners benefit equally from the success of a venture no matter which member of the team was responsible for the investment or took the position on the company’s board (which Balderton usually likes to do). Because of this, contacts and resources can be shared between partners with impunity.
The company will invest anything from $100k to over $20m, although typically the figure is around $5m, rising to $15m over the lifecycle of the Company. The firm likes to be the first institutional money in, and take pride in the fact that they “are in it for the long haul”. No quick fixes.
There’s 20 team members; 8 partners, 3 principals, and a mix of data scientists, fund managers, management accountants and legal counsel.
Partner Bernard Liautaud was the founder and CEO of Business Objects, a company that grew to nearly 7,000 staff and $1.5bn of revenue between 1990 and 2007, before being acquired by SAP for $6.8bn, and a recipient of the “Chevalier de la Legion d’Honneur” in France.
Roberto Bonanzinga, another partner, has held senior management positions at a number of high profile Silicon Valley companies, including Information Access Company which was acquired by the Thompson Corporation, Rob Moffat is an ex-Google manager from their global sales strategy team, and Daniel Waterhouse has a private equity background having been a partner at 3i, and before that, a strategic development and M&A consultant covering Europe, for Yahoo.
Given the structure and equal status of every partner it wouldn’t be fair to give extra credence to one particular partner or principal, but overwhelmingly the team have backgrounds in tech, investment, and are entrepreneurs to a man. On the numbers side, Alison Brownhill, who looks after the firm’s financial activities, was a Director at PwC.
Another team member to note is Suranga Chandratillake, the founder of blinkx, an intelligent search engine for video and audio content that he took public, listing on the LSE, after just 3 years with a $250m valuation. Today the Company is worth $1.3bn, which should give you an idea of the kind of performance that Balderton are expecting from their investee companies, and the kind of expertise they can bring to help make these kinds of deals happen.
Whilst it’s true that almost every Venture Capital firm is going to look at the same or similar fundamentals when making an investment decision, and probably reject the same 90% of applications based on preliminary observations, it’s still possible for VC’s to have clear points of difference in their approaches. From the research we have done, Balderton is business like, highly experienced and, as we mentioned before, in it for the long haul.
The firm are looking to find winners with excellent ideas who can go from very small to very big quickly, probably within a 3-5 year timeline. Thanks to their network, Balderton are likely to know all about the next top entrepreneurs coming through the system and find ways of helping them as early as they can. It would be interesting to see a breakdown but our guess is very few entrepreneurs will be unknown to Balderton and win a meeting on the strength of their online submission alone. Whether this is true or not, we can say for sure that Balderton takes good care of founders, and strives to give them everything they need to succeed.
Almost all of their “stable” of founder talent can be found carefully profiled on their website, from Breon Corcoran at Betfair, Julia Reynolds at Figleaves, and Nick Hungerford of Nutmeg; Most have strong academic backgrounds, even better business track records, are not flamboyant or “on a mission to change the world”, but certainly capable of disruption, more likely through intellect than force of personality. “Celebrity” or “Rock Star” founders are not really Balderton’s style, whether the business model appeals and the entrepreneur has a strong character is all that really matters.
We have already mentioned a few, but Balderton have been involved in some impressive exits: NaturalMotion (sold to Zynga for $527m), Yoox (completed a £700m IPO, MySQL (sold to Sun Microsystems for $1bn), and Sunrise, which was recently sold to Microsoft. There are many more, LoveFilm, acquired by Amazon, Big Fish Games (sold for $0.89bn), and still more in the pipeline.
Like yesterday’s feature VC, Google Ventures, Balderton invested in Kobalt, the music rights management company, but on this occasion they were not the lead investor, which they generally prefer to be. Balderton, will come in at early, growth or late stage. As we have said before, the most important aspect of any deal are the founders they will be partnering with, and the chances their companies have of disrupting a mass market.
To an extent Balderton’s future at the very top of the VC ladder in Europe depends on it continuing to attract the right calibre of staff. As long as it is seen as an ideal destination for the best entrepreneurs and consultants to take the next step on their career ladder and move into VC investing, the Company can go from strength to strength.
The other factor is securing the funds they need to keep making the investments they want to make, and again, bearing in mind that this is a “who you know” industry just as much as it is a “what you know” one, their relationships should remain strong, and in the event of losing a backer or two, it should not be impossible to replace them with another.
Venture Capital is a high stakes, risky game; what Balderton have done very successfully to date is manage that risk aggressively and tried to bet on as many “sure things” as they can. Given that their list of investments reads like a who’s who of Europe’s most promising start-ups and founders, it could be argued that attracting investment from Balderton is as close to a self-fulfilling prophecy as you are likely to get.