Index Ventures Teardown

Index Ventures has been having a great year with a slew of IPOs and having just raised a half-a-billion dollar fund. We analyze the firm's data to give you insight into their strategy, syndicates and more.

Index Ventures, a well-respected VC with roots in Europe firm has also become an active investor in the US. The firm has been a participant in disproportionately high number of IPOs this year including King Digital Entertainment which was valued at $7.09B at the time of exit. With Index Ventures’ success and their recently raised half billion dollar fund, we wanted to dig into the firm a bit more to understand them.

Below is CB Insights’ teardown of Index Ventures.

Notes:

Where’s the data & viz from? 100% of the visualizations and data you see in this teardown are directly from the CB Insights platform’s Investor Analytics tool.
What’s a Teardown? A product teardown is the act of disassembling a product to understand its parts, functionality, etc. An investor teardown is analogous in that we’re trying to understand a firm by analyzing data around their financing strategy, investment thesis, key people, exit history, investment syndicates and more.

Specifically, we’ll cover:

Recent Financings – Deal volume picks up in 2013; 2014 on track for more growth

Index Ventures saw its deal volume grow from 2012 to 2013 by 13% making 2013 the most active in the firm’s history. Index is already on track to exceed 2013 this year in deal volume based on their pace through the halfway point of the year. Here are some of Index Ventures’ most recent notable financings:

Index Ventures led the most recent funding round of BlaBlaCar, an online ridesharing community that connects drivers with empty seats and people looking for a ride in the UK. BlaBlaCar raised $100M in their July Series C.
BitPay, a developer of Bitcoin payment software, raised its Index Ventures-led $25M Series B in July. BitPay is the second bitcoin services company in Index Ventures’ portfolio after Index participated in Xapo’s $20M Series A-II just 6 days earlier.
Index Ventures jumped in on Secret, an anonymous messaging app, and co-led its July $25M Series B at a $100M valuation. The investment came just four months after Secret raised a $8.6M Series A led by Google Ventures at a rumored $40M valuation.

Below is a graph of Index Ventures’ monthly investment activity (deals & funding) over time taken from their profile on CB Insights.

Exit Activity – Many IPOs so far in 2014

Index Ventures’ year so far has been marked by a fantastic number of large IPOs. Of the 8 exits year-to-date, 5 were IPOs and 3 were acquisitions. By this time in 2013, there also were 8 exits, but only one was an IPO, Moleskine at a $626M valuation. Last year saw 18 exits in total. Some of Index Ventures’ notable exits in the the first 6 months of the year include:

Zendesk, a provider of cloud-based customer service software, went public in May at a valuation of $631.4M. Index Ventures was involved in their last funding round, a $60M Series D in September 2012.
Just-Eat, an online European food ordering service, went public in April at a valuation of $2.44B. Index Ventures participated in all of its funding rounds since its Series A in July 2009, totaling $129.4M.
King Digital Entertainment, a game developer, went public in March at a valuation of $7.09B. Index led participated in its only funding round in September 2005 at $46M with one other investor, Apax Partners.
Versartis, a biotechnology company, went public in March at a valuation of $488.6M. Index Ventures led their 2009 Series A as the only investor, and participated in their Series B, C, and D rounds.

The scatterplot below highlights Index Ventures’ exits over time which had disclosed valuations. The prevalence of dots in 2014 esp high on the Y-axis (valuation) highlights Index’s recent hotstreak.

Funding History – New fund focused on mobile, enterprise, networks, financial services

In June, Index Ventures raised a seventh venture fund of €400M, or $542M. Index Ventures VII will continue focusing on its core geographies in the U.S., Europe, and Israel. Investments will be aimed at mobile consumer, enterprise, networks, and financial services. These sectors include hot industries such as AI, robotics, Internet of Things, and bitcoin. Index has already used this new fund to expand into its first bitcoin companies BitPay and Xapo, both at Series A. This is the first new fund since 2012 when Index raised Index Ventures VI and the Life Sciences Fund, which has been responsible for early-stage investments in biotech companies including GenSight Biologics and the aforementioned exit of Versartis.

Notable Partners – Shared boards with VC leaders

Here is the activity of some of Index’s most notable partners.

Danny Rimer, brother of co-founders Neil Rimer (highlighted below) and David Rimer, joined Index Ventures in 2002, establishing the London office, and focusing his investments on internet infrastructure software and services. He is responsible for many notable investments, including Etsy, Factual, Flipboard, BSkyB, and Nasty Gal. He shares boards with big name investors like Marc Andreessen (Anki), Ben Horowitz (Factual), and Jim Breyer of Accel Partners (Etsy).
Mike Volpi joined Index Ventures in 2009 and established the San Francisco office in the same year with Danny Rimer. He sits on the boards of notable investments, including ElasticSearch, Hortonworks, Lookout, and Pure Storage. He receives the most news mentions of any partner at Index Ventures (see chart below). He shares 5 boards with Satish Dharmaraj of Redpoint Ventures (Pure Storage, PATH, Sonos, Cloud.com, StorSimple) as well as one or more boards with Peter Fenton of Benchmark Capital (Hortonworks, Zuora), Ben Horowitz (Opsware), and Fred Wilson of Union Square Ventures (Soundcloud).

Capture

Neil Rimer is one of the co-founders of Index Ventures. His investment interests include internet media, ecommerce, entertainment, education, and clean tech. He serves on the boards of notable investments including Funding Circle, Photobox, and Stack Exchange. He previously has served on the boards of companies that have gone public and others that have been acquired by CBS, Kodak, Nokia, and Synopsis.

Investor Analytics

Industry Heatmap – Consistent sector investment, more marketplace deals

Over half of Index Ventures’ investments are in the internet sector, followed by mobile & telecom and healthcare. This hierarchy has remained constant over the last 4 years. Within internet, eCommerce has seen significant growth in deals, increasing by almost 50% from Q1 2010–Q1 2012 to Q2 2012–Q2 2014. Investments in the marketplace industry in eCommerce have seen significant growth in both deal volume and total funding. Deal volume grew 62% and total funding increased 191%, driven by participation in Etsy’s $40M Series F in 2012 and Funding Circle’s $37M Series C in 2013.

The Industry Heatmap shows the distribution of investments by industry for Q1 2010–Q1 2012 on the left and Q2 2012-–Q2 2014 on the right. The size of the box represents the number of deals and the darkness of the blue represents total funding.

Stage Heatmap – Increased funding overall, Series A sees more action

Distribution of deals among stages saw little change, but funding overall increased and early stage investments saw large growth. Deals in the seed stage grew 38% in volume and 59% in total funding. Series A saw even more growth with 48% in volume and 113% in funding. That funding growth was driven by participation in several big Series A fundings, including GenSight Biologics in 2013 at $41.6M, and NumberFour at $38M also in 2013.

The Stage Heatmap shows the distribution of investments by stage for Q1 2010-Q1 2012 on the left and Q2 2012-Q2 2014 on the right. The size of the box represents the number of deals and the darkness of the blue represents total funding.

Geography Heatmap – Keeping to its core geographies U.S. and Europe

Index Ventures has held to their stated “core geographies,” investing almost exclusively in Europe and North America, with a few deals in Israel. Unlike many other global venture capital firms, they have not expanded to India and China in recent years as the startup scenes in those markets have boomed. Within the U.S., Index Ventures focuses on New York and California, where they have an office, but they also have invested in companies in seven other states in the last two years. In Europe, they invest most heavily in the U.K., where they are on the country’s most active investors. One of the biggest recent UK deals was that of Just-Eat. They have also looked to France and Germany. In Germany, Index has invested in tech IPO pipeline company Soundcloud.

The Geography Heatmap shows distribution of funds by geography. The size of the box represents the number of deals and the darkness of the blue represents total funding.

Financing by Stage – Early stage most common deal, late-stage as expected are the biggest

As might be expected, most of Index Ventures investment deals are at the Series A which makes up about 30% of all investments. This was followed by seed deals which make up another 22%. These highlight Index’s focus on getting in early to future winners. As might be expected, largest deals come at the mid- and later-stages where deals are between $16-$50 million. As a lifecycle firm, Index is able to invest early and then throughout the life of a company. As a result, they’re able to double-down or at least maintain ownership in companies that are poised to break out.

Below is a look at trends in round participation in the last 2 years.

New vs. Follow-on Investments – Stable ratio since 2011

The ratio of new to follow-on investments, or investments in companies in which Index Ventures has already invested, has remained between 40% and 80% for all but 6 of the last 20 quarters, indicating a generally healthy balance of new to follow-on investments. Volatility has decreased since the end of 2010 to a more stable ratio of 50% on average over the last 3 years.

Below is a screenshot from the Investor Analytics tab on CB Insights showing the ratio of new investments to follow-on by quarter over the last 5 years.

With Index Ventures’ new fund, we’d expect the % of new investments might tick up in the coming quarters as they aim to put money to work.

Investment Syndicates – Accel Partners is a top feeder and co-investor

Index Ventures looks to feeders Benchmark Capital and Accel Partners for some of its mid-stage investments, including Dropbox, Etsy, Zendesk, and BlaBlaCar. For early-stage investments, it most often looks to Y Combinator, which led to Index’s investments in Songkick, Microryza, and Strikingly. Index Ventures frequently coinvests with Accel Partners and Greylock Partners. SV Angel has also co-invested with Index Ventures on early-stage deals including Patreon, Secret, and Flipboard.

Below is our Investment Syndicate dashboard for Index Ventures which highlights and ranks top dealflow sources and coinvestors.