European Venture Capitalists Praise Balderton’s New $1.3 Billion Fund but Express Concerns Over Missed Opportunities in Europe’s AI Sector

Balderton Capital, a prominent and established venture capital firm in Europe known for backing companies like Revolt and Wayve, has successfully raised a new total of $1.3 billion. This funding has been allocated across two separate pools: $615 million for its Early Stage Fund IX and $685 million for its Growth Fund II. Discussions with venture capitalists by TechCrunch reveal a tempered enthusiasm regarding this announcement. 

This move also signals a resurgence in the European venture capital landscape, which had seen a period of stagnation following the zero-interest-rate policy and the bull market surge in 2021 and 2022 post-COVID. 

Highlighting the momentum, Balderton, based in London, noted studies demonstrating that, over 10- and 15-year spans, European venture capital efforts have yielded higher returns than their American counterparts, according to analyses from Invest Europe and Cambridge Associates. 

During a discussion with TechCrunch, Suranga Chandratillake, a partner at Balderton, mentioned the fund-raising process was smoothly executed, marking the quickest fund completion in their history, with about 80% of the capital coming from existing Limited Partners. He also shared that a significant contribution came from a major but undisclosed institution in the U.S., reflecting a growing recognition of European venture capital as a stable and integral part of the global VC ecosystem. 

European AI enterprises such as Mistral, Wayve, and Poolside AI are now responsible for 18% of all venture capital investments within Europe, as per Dealroom data. This development trails recent capital influxes to other European VCs like Accel’s European sector, Index Ventures, and Creandum.

In the past year, Balderton has made 12 new investments in firms including Checkly, SAVA, Tinybird, Qargo, Huspy, trawa, Payflows, Scalable Capital, Lassie, Writer, Anytype, and Deepset. 

However, Balderton’s exclusive focus on Europe means the firm has not engaged with the initial wave of AI startups emerging from Silicon Valley, such as OpenAI and Anthropic, which have received backing from major U.S. firms including Andreessen Horowitz, Sequoia Capital, and Lightspeed Venture Partners, all of which now maintain offices in London. 

Despite identifying London and Paris as crucial hubs of innovation and notwithstanding their French managing partner Bernard Liautaud, Balderton chose not to invest in Paris-based Mistral. Chandratillake explained that although they admire Mistral, the company wasn’t seen as a fitting opportunity for their investment strategy, citing the enormous funding requirements to remain competitive in the space as a significant deterrent. 

Balderton prefers to observe the AI sector’s evolution and selectively engage with emerging companies. Chandratillake highlighted that while building foundational AI models demands vast capital—often accessible to private equity or large public corporations—there lies potential in startups leveraging AI to address niche challenges, which aligns with their investment strategy. He referenced Wayve, part of their portfolio, that managed to secure the largest funding round any European AI firm has achieved thus far.

Industry feedback on Balderton’s funding initiative was also sought by TechCrunch. 

Brent Hoberman, founder of firstminute capital, commends the encouragement this brings to Europe, especially the focus on exclusively European ventures and the data supporting European VCs’ performance over the U.S. Susanne Najafi, Founding Partner at Stockholm’s BackingMinds VC, also praised the development, expressing optimism for growth-stage startups in raising capital within Europe.

An anonymously speaking VC, cautious of market implications, lauded Balderton’s judicious and pragmatic approach, considering them as sober decision-makers who prioritize sustainable investments over chasing outliers—a strategy that appeals to large institutional investors. However, Andrew J Scott, Founding Partner at 7percent Ventures, cautioned about the necessity for European managers to embrace substantial foundational technology bets to avoid lagging behind the U.S. in AI, space, and robotics sectors for the forthcoming decades.

This report has been updated with additional commentary from a VC pertaining to Balderton’s decision against investing in Mistral.