Index Ventures Buys When Everyone Else Is Selling

    index venturesIndex Ventures, a leading venture capital firm active in venture investing since 1996, has closed a €350 million early stage fund (press release here). Why is this relevant to the Nordics and Baltics? For two reasons.

    1) They directly contacted us and told about the new fund, which means that they are very actively looking at the arctic region, among other regions, for investments and wanted to get the message across. So if the product and the team is right, you have same changes of getting into their portfolio as the next guy. This leads to the second reason, which is perhaps the more important one given the times we live in.

    2.  Here we repeat what we’ve been saying all along and what got confirmed in the ArcticEvening last week: Now is a great time to invest, which is partly a direct consequence of the fact that in a down-cycle copy cats and weak teams disappear and great ones stand out. There is more talent in the market experimenting with new ideas since they either get layed off or decide to leave in consequence of their steep career advancement stalling. We also reiterate what Creandum said in that those who manage to establish themselves and grow in this climate will prosper further in the better times which eventually come. It might not be easy, but then again for a startup it never is, so really the playing field is just levelled when everybody else is neck deep too. Now you can use the feedback as a real yard stick to measure whether your idea is right or whether it needs more work, or whether you’re just working on a completely wrong idea. In good times even the bad ideas get funded as long as you are riding the right wave.

    Now, since the feedback is brutally honest (sometimes even too much so), it saves you a lot of time and investors a lot of money. One reason for the lack of new investments is because the venture capital funds are also strugling to raise money from their limited partners (LPs). And yes, why Index Ventures is investing when most of everybody else are pulling back is partly because they can. The truth is that they could raise money in any economy. But this is just because venture capital is the most merit based sport in the world, for both, for startups and for the VC funds themselves. Index can raise money because they have shown that their investors get their money back with generous interest. So just as it might be hard for the startups, it’s also hard for the VC funds. And this is exactly why the better venture capital funds just as the better startups see this economy as a great opportunity, when at the same time there are less competent startups and VC funds dying at an increasing rate. In this scenario the latter seem take most of the headlines, but a smart entrepreneur understands this and only increases his focus to navigate his startup in the chaos that was once well functioning economy. The very best entrepreneurs even see the chaos opening massive opportunities and jumps at them.

    All things considered, Index Ventures’ message from last week’s Tuesday is loud and clear.

    Index Ventures…with investments in a number of Scandinavian tech companies including Stardoll, MySQL (Sun), Imbera and Trolltech (Nokia), today announced we’ve closed a new seed / early stage fund. Our geographical focus remains the same – Europe, Israel and the US, and we continue to seek deals in the tech space, including enterprise, consumer, mobile and advertising.

    I don’t think there could be any stronger proof of the fact that it’s now or never, than the €350 million early stage fund that Index just raised. The message just can’t get more concrete than that. Just as Warren Buffet says “When investing, pessimism is your friend, euphoria the enemy”. Index seems to have taken heed.

    Time to get cracking people! I know we will.