From left to right, Accel general partners are Harry Nelis, Sonali de Rycker, Andrei Brasoveanu, Luca Bocchio and Philippe Botteri.
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Venture capital firm Accel said on Tuesday it had raised $650 million for its eighth fund aimed at investing in early-stage startups in Europe and Israel, a sign that the venture capital market may be showing signs of recovery.
The company made big early bets in areas such as social media apps Facebook and music streaming services Spotifysaid in a press release that the fund was raised to “support ambitious founders building global category-defining companies in Europe and Israel.”
Harry Nelis, general partner at Accel, said the European tech ecosystem in particular has changed dramatically in the nearly 25 years since Accel opened its London office as an independent fund in 2001.
“The environment has changed dramatically since then,” Nellis told CNBC. “People will ask us, can Europe produce a billion-dollar result?”
“There are now more than 360 venture capital-backed unicorns in Europe and Israel, and the entire ecosystem has grown from raising approximately $1 billion in funding to raising $66 billion in funding by 2023.”
Talent “flywheel”
Nellis said Europe was now developing a more promising talent pool, thanks to a “flywheel” of experienced employees from other companies that had become unicorns and themselves new companies the founder of.
A report published by the company last year, citing Dealroom data, showed that employees at 248 venture capital unicorns in the region powered 1,451 new technology startups in Europe and Israel.
Nellis pointed out that there are some emerging regions in Europe that investors have not paid much attention to, but these regions show great potential in technological innovation.
He points to Lithuania and Romania as examples of countries that are achieving major technological successes. For example, in Lithuania, second-hand marketplace Vinted is now a “unicorn” company worth $4.5 billion, while in Romania, UiPath is valued at $10.9 billion on the public market.
Accel expects to invest in 25 to 30 companies through its latest early-stage fund.
The launch of Accel’s eighth European fund comes as funding for high-growth tech startups has fallen sharply over the past two years.
This is due to the macroeconomic uncertainty caused by Russia’s full-scale invasion of Ukraine, coupled with rising central bank interest rates, causing a reset in technology valuations.
Against this backdrop, Accel’s ability to raise such large sums of money for European and Israeli businesses suggests that the tough technology environment may be showing signs of easing.
The firm has successfully closed its eighth fund in the region in just a few months, according to a person familiar with the matter who asked not to be named because details are not public.
Prior to this, Plural was a venture capital firm founded by the founders of Wise, Skype and Songkick. In January it raised 400 million euros ($431 million) in funding to back European tech startups.
World Fund, a venture capital firm focused on climate change, closed a €300 million fund in March.
Magnus Grimeland, chief executive of seed investor Antler, told CNBC earlier this year that early-stage venture capital activity and private company valuations have been slowly rising since the beginning of the year, and he expects Europe to follow the trend.
“It’s coming back,” Grimmeland said in a March interview at Antler’s London offices. “We are seeing more activity across the portfolio. In New York, we made eight investments in January, seven of which have had follow-on investments. The U.S. tends to move faster.”
Europe’s Artificial Intelligence Opportunities
Excitement over AI has led to an influx of capital into AI-focused startups, even as funding for new ventures has dwindled.
For example, companies like OpenAI, Anthropic, and Cohere have raised billions of dollars.
Nelis said Accel doesn’t want to be distracted from focusing on hot areas like artificial intelligence with its latest fund.
Instead, he said the firm will focus on leveraging its “get-ready” philosophy – which encourages deep focus and a disciplined, informed investment approach – to make its next startup investment.
“We’re lucky to have DeepMind in London and Fair (Facebook AI Research) in Paris, at least two large centers with a lot of AI expertise,” Nelis told CNBC.
“Together with smaller centers across Europe, we think Europe is very well positioned to create some important AI companies, just as we have created important enterprise businesses.”
Nelis said Accel’s way of thinking about artificial intelligence can be divided into three layers: the “basic model” layer, which refers to the algorithms that support advanced artificial intelligence systems; and the “tool layer” that helps the applications that sit on top of these algorithms operate. ; and “application layer”.
He added that he thinks Europe will excel in companies applying artificial intelligence, rather than the underlying model where U.S. tech giants have a huge advantage.
“My expectation is that Europe will produce some very interesting AI application companies,” Nellis told CNBC. “The base layer is the layer where, at least right now, U.S. incumbents have a real advantage — they have the advantage of computing power, large data sets and large amounts of capital.”
Synthesia CEO and co-founder Victor Riparbelli told CNBC that his company partnered with Accel last year because the company’s team knew “how to strike the right balance between visionary technology and useful technology.”
“There were a lot of cool demos in the artificial intelligence industry last year, but maybe there was too much bubble,” Ripal Bailey told CNBC via email. “It’s important to us to partner with a fund that shares our focus on delivering real, tangible business value.”
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