Balderton Capital, one of Europe’s top venture capital firms, has raised a new $400m fund to invest in European companies at Series A.
Other than that it’s business as normal. “Not much has changed, almost nothing has changed,” says Suranga Chandratillake, general partner at Balderton. The firm will continue to focus solely on Series A startups, mostly based in the UK, France, Germany and the Nordics.
Investing in diversity
Internally, however, things have changed.
Balderton, like almost every venture capital fund, is under the spotlight for diversity: both the diversity of its internal team, and of its portfolio companies. “There’s a lot to do,” says Chandratillake, and Balderton has made a start.
“It’s personally important to me as a brown, state-school educated person,” he says. “I don’t like that we continue to see a depressingly narrow band of founder types and archetypes.”
“I don’t like that we continue to see a depressingly narrow band of founder types and archetypes.”
To address this Balderton is focusing on two areas in particular: the diversity of its own company and its sourcing strategy.
“There’s no way you can genuinely connect with diverse talent if you yourself are not diverse. We’ve looked at who we hire, how we hire and made a bunch of changes to that over the past few years,” says Chandratillake. “The challenge there is that VC firms take time to change — the average tenure is in the decades in many cases.” (Balderton’s partners are currently all men; five members of the wider investment team are women.)
For a quicker fix Balderton’s team have also been critiquing how they make decisions and communicate — including bringing in an external observer to analyse their partner meetings — and making changes along the way.
As for sourcing, Balderton is trying to build relationships with networks outside of its own sphere to broaden the pool of founders heading its way. Take Angel Academe, an angel syndicate that backs female founders: “They seem to be finding a bunch of companies we’d never heard of before.” There’s no risk of competition here — the two investors are investing at different stages — so Balderton asked Angel Academe to send founders its way and to promote events it runs which might be of use to them.
Two-thirds of Balderton’s investments come through its relationships with seed investors and angel syndicates around Europe — but, unlike some venture capital funds, it also claims to read every single pitch it receives from unknown companies.
“We’re not big fans of this obsessions with warm intros… Ignore the non-warm intros at your peril.”
“We’re not big fans of this obsessions with warm intros,” says Chandratillake. “They work, it’s true; if a CEO I work with sends me a company to look at I’m going to take that seriously. But you can end up missing a lot of people if you use that as your filter. Ignore the non-warm intros at your peril.” (One of Balderton’s most successful investments to date — e-commerce company The Hut Group — pitched to the firm through its generic email address).
“[Warm intros] also overemphasise existing networks in tech. There’s some value in that, but there are lots of interesting founders who are not in those networks.”
This takes some effort on the part of the venture capitalists. “I get enough emails — I could spend my whole life just meeting those companies,” says Chandratillake. “You have to not be lazy like that.”
“There’s nothing more exciting than meeting a founder from some unexpected connection with an interesting idea — and knowing that no-one else knows about them. That’s what you dream about as a VC.”