Atomico, the venture capital firm founded by Skype co-founder Niklas Zennstrom, has raised $820 million for a new fund — the biggest since it was set up by the billionaire in 2006.
The firm plans to cash in on the ongoing “renaissance” in Europe’s tech sector, according to Siraj Khaliq, an investment partner for Atomico. Khaliq noted the rise of so-called unicorns — privately-held tech firms valued at $1 billion or more — in the continent over the past decade. In 2014, Europe was home to just 22 unicorns, according to Atomico’s own data, while today there are over 100 across the region.
“Now the talent exists here, the mentorship exists here. All these key ingredients you need for European success stories actually exist,” Khaliq told CNBC in an interview. “It’s not to say we can’t be better, but we’re really on the track.”
Khaliq was formerly founder of Silicon Valley agriculture data firm The Climate Corporation — which Atomico had invested in — but left the U.S. after it was acquired by Monsanto for $1.1 billion.
Atomico said the latest fundraise was “oversubscribed,” closing above its target of $750 million and attracting investment from a range of institutional investors. The firm declined to disclose the names of its limited partners, but said it included pension funds and sovereign wealth funds, as well as the founders of European start-ups Adyen, Klarna and TransferWise. This latest investment vehicle takes Atomico’s total assets under management to $2.7 billion.
European VCs have been on a tear in recent months, raising hundreds of millions of dollars to back non-Silicon Valley tech firms. Revolut backer Balderton Capital raised a $400 million fund in November, while not long after early Spotify investor Northzone closed its own $500 million fund.
Last year, start-ups in Europe managed to raise well over $30 billion, according to multiple data trackers, thanks to an increase in the number of so-called $100 million “mega-rounds.” The continent has seen an uptick in interest from U.S. and Asian tech investors, a trend that’s given European VCs impetus to remain competitive.
According to Atomico, its new vehicle is Europe’s largest single “pure-play” venture capital fund, meaning it only starts buying into start-ups at the early stage. Data from research firm Pitchbook indicates that DST Global, Rocket Internet and Index Ventures have closed larger funds in the past, but Atomico explains these all fall into the category of growth-stage or corporate VC.
Primary focus on Europe
Atomico’s new fund has already started splashing the cash, with investments in urban farming tech firm Infarm and biotech upstart Healx. Since it was established, Atomico has backed over 100 start-ups including Klarna and Supercell, the maker of mobile game “Clash of Clans.” Although Atomico also invests in U.S. companies, Khaliq said it has been “a little more explicit” that its investment strategy is now primarily focused on Europe.
He said the investment firm didn’t need to invest in countries beyond Europe, with the “small exception” of late-stage U.S. companies looking to expand into the continent. The new fund will be divided up into three teams focused on consumer, enterprise and “frontier” technology — frontier start-ups being those that place an emphasis on cutting-edge innovations in science.
The news comes at an interesting time for tech investors following worries that start-up funding could dry up after the failed initial public offering and subsequent bailout of office rental firm WeWork. Concerns over the lack of profitability from WeWork, Uber and others has led some tech investors to urge start-ups to focus on their “path to profitability.”
Despite the WeWork debacle, however, Khaliq said Atomico would continue to bet on lossmaking companies, referring to e-commerce giant Amazon as a “prime example” of a company that didn’t need to reach profitability initially in order to be successful.
“We’re one of the VCs that’s been around longest in Europe,” he said. “What that means is we have a kind of discipline when we look at European start-ups, how much they’re worth and what the valuation is for entry.”