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Balderton Capital, one of the so-called “big four” early-stage VC firms in London (the others being Accel, Atomico and Index), has raised a new $400 million fund to continue backing European tech startups at Series A.
Dealroom recently released a report that pegged Balderton as the most active Series A investor in Europe (between 2014-2018), and in many ways this new fund is a continuation, and business as usual for the firm. It is also roughly the same size as the VC’s last Series A fund, which it closed in 2017 at $375 million.
That’s not to be confused with Balderton’s other recently launched “secondary” fund, which is dedicated to buying equity stakes from early shareholders in European-founded “high-growth, scale-up” technology companies. The move essentially formalised the secondary share dealing that already happens — typically as part of a Series C or other later rounds — which often sees founders take some money off the table so they can improve their own financial situation and won’t be tempted to sell their company too soon, but also gives early investors a way out so they can begin the cycle all over again.
Meanwhile, Balderton says the new Series A fund is being launched against a backdrop of “unprecedented momentum” within the European tech ecosystem. The VC notes that the number of Series A rounds in Europe per year has quadrupled since 2012, with the total amount of VC funding going into European startups hitting record highs last year — from €11.5 billion in 2014 to a chunky €24.6 billion in 2018.
That, together with the sheer number of new funds that have launched over the last 12 months — and three I’m covering this week — leads me to wonder out loud if tech, and Europe in particular, has entered a bubble.
“I don’t think we are,” Balderton Partner Suranga Chandratillake tells me during a call, before acknowledging that it is often hard to know if you are in a bubble if you are actually in one. “If you look at the public markets, the valuations around tech companies, while they are high, I would argue that in many cases they are justifiable when you look at the profitability and the growth rate of those businesses, especially things like enterprise software. But I think it’s harder when you get into businesses where they are more one-off… [where] we don’t necessarily know exactly how to value those long term.”
On Europe specifically, Chandratillake points out that some European tech hubs are more heated than others and that sentiment can vary considerably per geography. “As you get to more and more the local level, of course, you can experience what feel like sort of comparative bubbles. So, you know, maybe London was expensive two years ago, and France is expensive right now at Series A or whatever, but I don’t think those things really matter in the long run, because ultimately they iron out as long as the employee valuations are sensible. And as an investor, you’re paying attention to that stuff when you’re going to make an investment.”
One rumour within London VC is there are firms that have felt pressured to do follow-on investments in portfolio companies they otherwise might not have during cooler times, for fear of signalling to the market not just that a company isn’t doing well but that the VC firm itself isn’t as founder-friendly as competing VCs. How does Balderton think about signaling?
“Signaling is a massive deal [in venture capital],” says Chandratillake. “And actually, this is an area where, you know, we think we have a fairly strong position, because for over 10 years now we have focused almost entirely on Series A… and we are very open about that.”
He says that unlike other Series A VCs that invest at Series B or Series C, too, and also quite often dabble in seed, companies backed by Balderton shouldn’t expect the firm to “lead or be a major part of your Series B.”
“Of course, we’ll help, we’re going to do some of our pro-rata or maybe all of our pro-rata to try and protect some of our ownership, all those sorts of rational things we do. But we’re not raising a fund which allows us to be a big investor in your Series B and your C and your D and so on. I think as long as you’re really open with entrepreneurs about that early, they totally get that and they understand why it works economically for us and why it’s a good thing.
“Then if you do that for a long enough period of time, as we have, and stick to that — so you don’t do weird things like, you know, say that, but then on the other hand with the most interesting company, you try to bully your way into more of a Series B or whatever, then the ecosystem overall starts to realise… then the signal problem goes away.”
With regards to future investments, Chandratillake says Balderton will continue to invest all over Europe across any sector where “information technology” is being leveraged and creating value.
In the fund prior to last, for example, fintech was a major focus, backing companies like Revolut and Nutmeg, but more recently the VC has been investing more in health tech, where computer science is helping life science solve problems faster or cheaper.
“I think that there will be more of that,” says Chandratillake. “There’s a lot more to be done in this health tech space, both at the patient level, but also actually a lot of really interesting things behind the scenes that will help health systems operate more efficiently and use technology in interesting ways. It’s a really interesting area for Europe, because we have, you know, within the continent, a plethora of different health systems — from almost fully private systems through to obviously entirely state single payer systems like the NHS. It’s a great place to experiment with different models. It’s also of course, as a continent, home to some of the most important pharmaceutical companies [in the world].”
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My MacBook Pro is three years old, and for the first time in my life, a three-year-old primary computer doesn’t feel like a crisis which must be resolved immediately. True, this is partly because I’m waiting for Apple to fix their keyboard debacle, and partly because I still cannot stomach the Touch Bar. But it is also because three years of performance growth ain’t what it used to be.
It is no exaggeration to say that Moore’s Law, the mindbogglingly relentless exponential growth in our world’s computing power, has been the most significant force in the world for the last fifty years. So its slow deceleration and/or demise are a big deal, and not just because the repercussions are now making their way into every home and every pocket.
We’ve all lived in hope that some other field would go exponential, giving us another, similar, era, of course. AI/machine learning was the great hope, especially the distant dream of a machine-learning feedback loop, AI improving AI at an exponential pace for decades. That now seems awfully unlikely.
In truth it always did. A couple of years ago I was talking to the CEO of an AI company who argued that AI progress was basically an S-curve, and we had already reached its top for sound processing, were nearing it for image and video, but were only halfway up the curve for text. No prize for guessing which one his company specialized in — but it seems to have been entirely correct.
Earlier this week OpenAI released an update to their analysis from last year regarding how the computing power used by AI1 is increasing. The outcome? It “has been increasing exponentially with a 3.4-month doubling time (by comparison, Moore’s Law had a 2-year doubling period). Since 2012, this metric has grown by more than 300,000x (a 2-year doubling period would yield only a 7x increase).”
That’s … a lot of computing power to improve the state of the AI art, and it’s clear that this growth in compute cannot continue. Not “will not”; can not. Sadly, the exponential growth in the need for computing power to train AI has happened almost exactly contemporaneously with the diminishment of the exponential growth of Moore’s Law. Throwing more money at the problem won’t help — again, we’re talking about exponential rates of growth here, linear expense adjustments won’t move the needle.
The takeaway is that, even if we assume great efficiency breakthroughs and performance improvements to reduce the rate of doubling, AI progress seems to be increasingly compute-limited at a time when our collective growth in computing power is beginning to falter. Perhaps there’ll be some sort of breakthrough, but in the absence of one, it sounds a whole lot like we’re looking at AI/machine-learning progress leveling off, not long from now, and for the foreseeable future.
1It measures “the largest AI training runs,” technically, but this seems trend-instructive.
Voi Technology, the “micro-mobility” startup that operates an e-scooter service in a 38 cities across 10 European countries, has raised an $85 million in Series B funding.
Backing the round is a mixture of existing and new investors. They include Balderton Capital, Creandum, Project A, JME Ventures, Raine Ventures, Kreos Capital, Inbox Capital, Rider Global, and Black Ice Capital. The new funding brings the total raised by Voi to $136 million.
Eagled-eyed readers will have noticed that, based on our previous Voi coverage, the total figure is $32 million short. That’s because not all of Voi’s previous Series A commitment was cashed in after the company was offered more favourable terms for its $30 million Series A extension and therefore elected not to draw down the second tranche of its original Series A.
Launched in 2018, the company is best-known for its e-scooter rentals but now pitches itself as a micro-mobility provider, offering a number of different transport devices. These include various e-scooter and e-bike models, in a bid to become a broader transport operator helping to re-shape urban transport and wean people off using cars.
To date, Voi says it has 4 million registered users and has powered 14 million rides. More recently it has launched new, more robust hardware that has been designed to sustain the rigours of commercial e-bike sharing. The idea is that more suitable hardware will help e-scooter companies improve margins since more rides can be extracted from the life-span of each vehicle.
On that note, Voi says it will use the new funding to develop “strong profitable businesses” in the 38 cities where it is already operating, as well as increase its R&D spend to improve its technology platform and products. Earlier this year, the company announced that it is already profitable in the cities of Stockholm and Oslo.
“Clearly, we feel we are on track to achieve this in more of our cities and that is our aim,” Voi co-founder and CEO Fredrik Hjelm tells me. “At this point, a key focus for us is to ensure we continue to increase the lifetime of our e-scooters, forge key partnerships and continue to work in those cities which provide the best conditions for a profitable e-scooter business”.
Hjelm says that Voi’s version 2 scooters are projected to last over 18 months, which means the company should be in profit before it needs to raise again. However, he wouldn’t be drawn on when that might be.
With regards to R&D and improvements to the Voi platform, the company will continue to work on the lifetime of its e-scooters, in addition to improved repair management via integrating “predictive diagnostics”.
Hjelm also says Voi is developing “AI-powered” fleet management and more generally the platform’s capability to support future product portfolio expansion. In other words, we can expect new micro-mobility device categories in the future.
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