As European startups continue to search for signs of lasting market confidence beyond the hype surrounding AI companies, Atomico, one of the region's largest and most iconic venture capital firms, has raised more cash to make investments that could signal real market movement. The venture capital firm has raised a new fund totaling $1.24 billion to back early- and growth-stage startups across the region.
London-based Atomico is calling it its “largest fundraise to date,” but it's technically spread across two pools of capital: Atomico Ventures VI, a $485 million fund aimed primarily at Series A companies (with some reserved for seed), and a separate $754 million fund, Atomico Growth VI, aimed at companies in Series B through pre-IPO stages.
While raising and allocating capital from separate funds is commonplace at many venture capital firms today, it is notable that Atomico has closed two separate funds run by separate teams. The firm has historically focused on earlier funding rounds while dabbling in later stages where it made sense. It is now poised to focus equally on the later stages of a startup's journey with a dedicated fund.
The move also signals uncertainty among some investors who are hesitant to put money into startups that aren't yet profitable. The structure could make it easier for Atomico to draw capital from risk-averse limited partners (LPs) into the fray by allowing them to put money into proven businesses, rather than putting it all into a single fund of any size, from seed to Series F.
The news comes amid a global venture capital downturn, a trend to which Europe has not been immune.
One of the things Atomico has built its reputation on in the investment world is its annual research reports on the state of the European tech ecosystem, with a particular focus on the venture capital side of the market. The latest report is gloomy, noting that funding for European startups has halved in 2023 due to factors including geopolitical events, inflation and interest rates amid a continuing economic downturn. It also concludes that market and investment data has been skewed into 2021 and 2022, with spikes in demand for certain types of technology (due to COVID-19) and other factors resulting in major outliers in revenue, funding and valuations.
European venture capital fundraising last year actually slightly exceeded pre-pandemic figures. Optimists would interpret this as a sign that tech markets may be in a better position than the gloomy data suggests. Q2 2024 data and a string of new funds from some of the region's prominent venture capital firms could support this theory. In May, Accel announced $650 million in new funding for early-stage startups, and more recently, Balderton raised $1.3 billion in two new funds: $615 million for early stage and $685 million for growth.
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Founded in 2006 by Skype co-founder Niklas Zennström, Atomico started with an initial fund of $73 million and over the course of nearly two decades has raised $165 million Fund II (2010), $476.6 million Fund III (2013), $765 million Fund IV (2017) and $820 million Fund V (2020).
Atomico's latest fund is over 50% larger than its previous fund. But Atomico's sixth fund stands out for having two distinct areas of focus. That may subconsciously speak to investor mindsets, given that one of the funds missed Atomico's fundraising goals. According to a filing with the U.S. Securities and Exchange Commission (SEC) last year, Atomico had sought $600 million and $750 million for its venture and growth funds, respectively. That means it slightly exceeded its goal on the growth side, but missed its venture fund goal by nearly 20%.
On the one hand, it makes sense for Atomico to allocate more capital to later-stage companies, given that its investment portfolio has grown over time: what were once early-stage companies are now in full scale-up mode and need more capital than ever before. On the other hand, the failure to reach its funding goal for early-stage startups indicates that there are fewer investors willing to back startups than Atomico had hoped.
Atomico has already made around 21 investments across both funds, including investments from Atomico Growth VI into a portfolio that includes DeepL and Pelago, as well as leading Corti's Series B round, the company said. In the early-stage space, Atomico Ventures VI has put capital into Neko Health, Ven, Dexoly, DeepLy, Strize and Lakera since the fund first opened in early 2022.