Again in April 8, 2021 Index Ventures, one of many only a few ‘authentic gangsters’ of the European VC scene, mentioned it was form’ve going ‘again to its roots’. It introduced the launch of a brand new $200 million devoted seed investing automobile dubbed ‘Index Origin’.
Now, should you solid your minds again, this was through the white-heat tech bull run of final yr when valuations hit the roof and startups hardly ever wished for funding. Due to this fact, Index’s new fund title thus paid homage to the agency’s origins as a seed fund, given that previously it had backed firms like Robinhood, Figma, Deliveroo and Clever, all on the seed stage.
Throughout the previous few 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 phases of startups. However with a world recession looming within the subsequent yr, a Crypto ‘nuclear winter’, and exterior components just like the warfare in Ukraine, you would possibly suppose that traders like Index can be drawing of their horns.
Not so. Maybe reminiscent of the age-old view that one of the best startups are born counter-cyclically, Index is as we speak upping-the-anti with a second “Origin Fund” which might 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 embody early-stage fund Index Ventures XI ($900m), and development fund Index Ventures Progress VI ($2bn). Meaning 75% of Index’s preliminary investments are Seed or Sequence A.
The brand new Origin fund additionally seems – not unexpectedly – to be geared to the extra trendy surroundings the place co-funding for startups also can come from such disparate sources as solo GPs, Angels and plenty of present or exited entrepreneurs.
Index says it hopes to repeat the success entrepreneurs such Dylan Discipline, for whom Index wrote his first examine.
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 america 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 Companion based mostly in SF advised me by way of e mail: “All through our expertise as early stage traders, we realized that there’s a necessity for a unique type 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 sources and a giant community and seed funds that solely concentrate on seed stage.”
The concept, she mentioned, is to mix these two approaches: “With Index Origin, we wished to make it potential for founders to get one of the best of each worlds – the sources they should develop quick, mixed with the early-stage experience and arms 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 are able to present entrepreneurs with the absolute best assist 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 firms since its launch, we determined to boost a brand new fund and enhance the dimensions to construct on this momentum,” mentioned Achadjian.
How did Index discover it increase cash on this ‘downturn’ surroundings?
Danny Rimer, Companion based mostly in London mentioned, (additionally by way of e mail): “Index is all about conviction. On account of holding the principle factor the principle factor, we’ve taken a really contrarian strategy in the case of 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 gives one of the best 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 an excellent 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,” mentioned Rimer.
How is the early stage surroundings within the US? And in Europe? What’s your prediction for subsequent yr?
Rimer added: “In contrast to the expansion phases, the place funding tempo has slowed down dramatically, at early phases 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 just lately, for us, the lion share of firms we’ve seen to date on this sector usually are not ones we’d put money into. We see blockchain for what it’s: a strong new know-how, however not the brand new web. Our hope is that given every little thing that has occurred to this sector this previous yr, we are going to concentrate on firms that need to construct actual worth for customers, fixing an actual ache level quite than one thing speculative in nature.”
In the previous few months Index expanded with workplace opening in New York and employed a brand new associate in Tel Aviv.