mercredi 23 septembre 2009

Index Ventures: Envy of Industry

Index Ventures, the Geneva- and London-based partnership, has much to gloat about lately. In the depressed European markets, Index stands out as the most successful venture fund not only in terms of returns but also in that they exhibit the chutzpah that characterizes the best in the business. For a group that has yet to celebrate its fifteenth anniversary, they have performed with flying colors. In addition, their presence and their portfolio have spanned the world with disruptive business models.

Of course, some might argue that given the odds of sourcing a startup with global potential from Switzerland, the founders had to scout entrepreneurs outside their comfort zone. They did so by finding firms with Scandinavian born entrepreneurs (MySQL), polish born entrepreneurs (Mobissimo), or Eastern Europeans (Skype). By all metrics, they have attracted peer envy even after the dot-com bubble burst. And why not when Index holds shares in two of the best exits in the Internet and open-source sectors. After naysayers had lost hope on MySQL’s financial potential and its millions of users, Sun Microsystems wrote a $1 billion check in 2007. Three years before, eBay paid over $3 billion for Skype, which had been jointly backed by Mangrove, DFJ, and Index. Besides those head-turners, the Swiss-British fund managed to raise eyebrows with its controversial but highly profitable ($100Million in weekly sales) portfolio company Betfair. The UK betting site, which boasted more than 2 million members worldwide, would be declared unlawful in the United States, and its CEO was consequently arrested during a layover flight in the states.

So it came as little surprise that Index raised its last two funds in a heartbeat. In 2009, in the midst of the crisis, they brought a large third early-stage fund to life, with $500 million raised from LPs such as Alpha (the VC arm of Credit Suisse). A year earlier they entered the growth capital arena with a $600M fund, which has been put to work a couple of weeks ago in the repurchase of a stake in, of all things, Skype. In total, with $1.5 billion of capital under management, one could believe they have become the European fund with the best LP lineup and enough cash to attract the best entrepreneurs.

At the same time, their team has been built with a lot of idiosyncrasies. Three brothers work side by side with seven other partners dedicated to either life sciences or information technology. Among them, Danny Rimer has been dubbed one of the smartest investors in Europe. The youth of the team is also unheard of: Most are just about to turn 40, which will give them lasting power and an ability to grow in the long term. Recently, they also pulled a coup in hiring the former Cisco acquisition Czar, Tom Volpe, who will oversee some of their portfolio in California.

In less than a few years, Index has become the global player to watch in Europe, according to Nenad Marovac, the partner of DN Capital, a fund based in London. If they start operating in Asia with similar success one could only imagine where they could go.

Source : Red Herring, 15/09/09

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