Index Ventures, the leading European venture capital firm, today announced a new fund of more than $575m (400m euros) to invest in late stage European startups.
The goal is to invest between $30m and $60m in mostly European startups that would be at a stage where they would be considering being acquired. But acquisitions are largely made by US companies, especially acquisitions of Index's portfolio companies, which include Skype, Last.fm, and MySQL.
Dominique Vidal, one of the managers of the new fund, said:"In many of these cases, investing additional capital and time in the business will result in a much greater long-term payoff and allow the entrepreneur to continue growing his or her company into a market leader."
The new Index fund is the first of its kind in Europe and it clearly shows that the exit strategy has changed for startups, and that it won't be as easy to find large US companies to acquire European tech or life sciences firms.
For European startups, this is a risky strategy. Companies agree to be acquired not so much for the money, but because they need a larger platform. A larger company can leverage their technology and services far better, and far more quickly, than by growing organically.
Without a larger partner, European startups will find it more difficult to become market leaders, even if they have the capital.