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Balderton Capital Raises $1.3 Billion: Europe Challenges U.S. VC Dominance | Generative ai financial services mckinsey | Generative ai use cases in financial services | Benefits of generative ai in healthcare | Turtles AI

Balderton Capital Raises $1.3 Billion: Europe Challenges U.S. VC Dominance
With a $1.3 billion raise, Balderton Capital marks a significant step for European venture capital, focusing on AI and innovative startups.

Highlights:

  • Balderton Capital’s new fundraising: $1.3 billion split between two funds for early-stage and growth investments.
  • European fund performance: European VC funds have outperformed U.S. funds in long-term returns.
  • Focus on AI and tech startups: Targeted investments in companies using AI to solve specific problems, avoiding large bets on foundational models.
  • European vs U.S. competition: European funds are gaining ground, but doubts remain about their ability to support large-scale foundational technology investments.
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The recent announcement by Balderton Capital, one of Europe’s leading venture capital firms, of raising $1.3 billion across two separate funds marks a significant moment for the European venture capital sector. While the U.S. market remains dominant, Europe is emerging as a relevant player, with returns outperforming American VCs over 10-15 years.

 

Balderton Capital, a historic European venture capital fund based in London, known for its investments in companies like Revolut and Wayve, has recently announced a total fundraising of $1.3 billion, divided between an Early Stage Fund IX of $615 million and a Growth Fund II of $685 million. This milestone comes at a time of recovery for the European venture capital sector, following a disappointing two-year period after the peak of investments recorded during the pandemic and the zero interest rate policy (ZIRP).

 

According to data from Invest Europe and Cambridge Associates, Balderton emphasized how European venture capital funds have achieved higher returns than U.S. funds over a 10- and 15-year period, signaling a significant shift in the global venture capital landscape. Suranga Chandratillake stated that the fundraising process was faster than in the past, with about 80% of the capital coming from existing investors.

 

A particularly notable aspect of this fundraising round is the participation of a large, unnamed U.S. institution, demonstrating the growing confidence of global investors in the European venture capital market. Chandratillake stressed that, although the perception of European venture capital as a consolidated reality is now widespread among industry operators, it has taken time for this to become entrenched in the global mindset.

 

The European AI startup landscape is evolving rapidly, with companies like Mistral, Wayve, and Poolside AI now accounting for 18% of all European VC funding, according to Dealroom. However, Balderton decided not to invest in Mistral, a decision that sparked some discussion in the industry. According to Chandratillake, although Mistral is considered a great company, the investment did not fit Balderton’s model, which focuses on early-stage investments. The high capital required to compete with industry leaders and maintain a relevant position in the market would have posed excessive risk for a fund focused on early-stage investments.

 

Balderton, while recognizing the importance of foundational models in AI, believes that building these models requires substantial capital, better suited to private equity funds or established tech giants. Balderton’s focus remains on companies that use AI technology to solve specific problems, as evidenced by the investment in Wayve, which raised the largest round for an AI startup in Europe.

 

The European venture capital sector is seeing renewed interest, with funds like Accel, Index Ventures, and Creandum recently announcing new rounds of fundraising. The competitive landscape is evolving, with European funds now able to compete more effectively with U.S. funds for growth-stage investments. However, some in the industry remain skeptical about European funds’ ability to support large-scale foundational technology investments, leaving control of emerging sectors like AI, space, and robotics in the hands of U.S. funds.

 

In the past year, Balderton has announced 12 new investments in emerging companies, confirming its commitment to supporting European innovation. Among these, companies like Checkly, SAVA, Tinybird, and Huspy stand out, operating in diverse sectors but sharing a common focus on using advanced technologies to tackle contemporary challenges.