4 months ago
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Index Ventures is announcing $2.3 billion in new funds to finance the next generation of tech startups globally. These new funds are spread across different stages with $800 million dedicated to venture investment and $1.5 billion set aside for growth and late-stage companies.
How do these funds compare to the previous ones? In 2021, Index Ventures raised $900 million for Index Ventures XI and $2 billion for Index Ventures Growth VI , and it also has a separate early-stage fund. The firm raised $300 million in 2022 for its seed fund, Index Origin II.
So this fund is a hair smaller. But the firm says that this is just about raising the right amount for the current market. Index says it spent mere weeks on this fundraising process and raised the funds entirely with its existing LP base.
“We’re in a really fortunate situation where our funds were raised in a few weeks from existing LPs mainly, and we’re really oversubscribed,” Nina Achadjian (pictured left), an Index partner based in San Francisco and focused on B2B enterprise software, vertical SaaS and AI, told TechCrunch.
“And we were very intentional about the size. I think it would be very easy to just continue raising larger funds. And we had a bottom up approach and looked: ‘what are the sizes of growth rounds happening right now? Where are the opportunities in venture?’” she added.
For venture investment, the firm divides these rounds into two categories: AI and other. AI funding rounds at the seed and Series A stages are much bigger than the average funding round. But non-AI Series A rounds tend to be a bit smaller these days. That’s why it sorts of evens out and Index Ventures raised more or less the same amount on that front.
As for late-stage deals, the average size of late-stage rounds has fallen drastically since 2021. That’s why this year’s growth fund is smaller.
“We don’t think about aggregating assets. And I think to your point, other folks in the industry that have gotten big have actually moved towards asset accumulation, which is a totally different strategy,” Shardul Shah (pictured right), an Index partner based in New York and focused on enterprise investing, infrastructure security and AI, told TechCrunch.
AI as an accelerator to innovation
At the same time, the team believes the recent progress in artificial intelligence represents a significant technology breakthrough and could foster a new wave of startup opportunities.
“I think at this moment, there’s a real reckoning of the foundation models,” Achadjian said. “It seems like it’s kind of consolidating to three or four companies. It seems there are still some open questions around security, the cost of delivering — these inference costs — and also just how these things are going to scale over time.”
“But I think that actually there is a huge opportunity once those questions are answered for a lot of entrepreneurs to build upon those building blocks to really add value that’s not just like a feature,” she added. According to her, “the best may be yet to come” in the AI space.
Shah added that artificial intelligence also creates investment opportunities in new industries for VC firms. For instance, manufacturing, drug discovery and legal services aren’t usually tech-enabled industries. But AI might become an innovation catalyst in these verticals in the years to come.
With this in mind, Index Ventures will remain an opportunistic VC firm that invests across all stages in 24 tech ecosystems, from North America to the U.K., Europe and Israel. The firm has offices in San Francisco, London and New York but has a global strategy with global funds, a single unified team and funds that aren’t specific to a specific vertical because the tech industry changes at a rapid pace.
And when you look at Index Ventures’ investment portfolio, it includes some of the most successful tech companies of the past few years, such as Figma, Revolut, Roblox, Scale AI and Wiz. Over the past 28 years, Index Ventures has funded 108 unicorns, 23 decacorns and 57 companies that went public. There’s no reason to change a recipe that already works.
