Index Ventures is announcing a new $2.3 billion fund to fund the next generation of technology startups around the world. The new funds are diversified across multiple stages, with $800 million dedicated to venture investing and $1.5 billion dedicated to growth and later-stage companies.
How do these funds compare to previous funds? In 2021, Index Ventures raised $900 million for Index Ventures XI and $2 billion for Index Ventures Growth VI, and also has another early-stage fund. The firm raised $300 million for its seed fund, Index Origin II, in 2022.
That means the fund is a bit small, but the company says it's raising an amount appropriate for the current market. Index says the fundraising process took just a few weeks and that it raised the entire amount from its existing LP base.
“We were in a very fortunate position where we were able to raise the money within a few weeks, primarily from existing LPs, and we were really oversubscribed,” Nina Achadjian (pictured left), a partner at San Francisco-based Index, which focuses on B2B enterprise software, vertical SaaS and AI, told TechCrunch.
“And we thought very intentionally about scale. I think it would be very easy to just continue to raise larger funds. And we took a bottom-up approach and asked, 'How large are the growth rounds that are happening today? Where are the venture opportunities?'” she added.
In terms of venture investments, the firm splits these rounds into two categories: AI and other. AI funding rounds at the seed and Series A stage have been much larger than the average funding round. But non-AI Series A rounds have tended to be a bit smaller recently. So there's some balance, and Index Ventures has raised roughly the same amount on that front.
When it comes to later-stage deals, the average size of late-stage rounds has declined significantly since 2021, which is why growth funds this year have been smaller.
“We’re not looking to aggregate assets, and as you say, other companies that have gotten big in the industry have actually moved towards asset accumulation, which is a totally different strategy,” Shardul Shah (pictured right), a New York-based partner at Index that focuses on enterprise investing, infrastructure security and AI, told TechCrunch.
AI as an accelerator of innovation
At the same time, the team believes that recent advances in artificial intelligence represent an important technological innovation and could spur a new wave of startup opportunities.
“I think there's really a rethinking of the foundational model going on at this point,” Achadjian said. “It seems like it's consolidating down to three or four companies. There are still open questions about security, the cost of serving (inference costs), and how big these things will scale over time.”
“But I think once these questions are answered, there will be a huge opportunity for a lot of entrepreneurs to build on these foundations and really add value beyond just functionality,” she added. According to her, “the best may be yet to come” in the AI field.
Shah added that artificial intelligence also creates investment opportunities for venture capital firms in new industries — manufacturing, drug discovery and legal services, for example, aren't typically tech-enabled industries, but AI could be a catalyst for innovation in these sectors in the coming years.
With this in mind, Index Ventures remains an opportunistic VC firm investing at all stages of 24 tech ecosystems, from North America to the UK, Europe and Israel. The firm has offices in San Francisco, London and New York, but because the tech industry is rapidly changing, the firm has adopted a global strategy with a global fund, a single integrated team and a fund that is not industry-specific.
Looking at Index Ventures' investment portfolio, it includes some of the most successful technology companies of the last few years, including Figma, Revolut, Roblox, Scale AI, and Wiz. Over the past 28 years, Index Ventures has funded 108 unicorns, 23 decacorns, and 57 publicly traded companies. There's no reason to change a recipe that already works.