As European startups continue to look for signs of sustained market confidence beyond the hype around AI companies, Atomico — one of the region’s more iconic, largest venture capital firms — has raised more money to make investments that might indicate how the market is really moving. The VC has closed new funds totalling $1.24 billion to back early- and growth-stage startups across the region.
London-based Atomico is describing this as its “largest ever fundraise,” although technically it is across two pots of money. “Atomico Venture VI” weighs in at $485 million for mostly Series A-stage companies (with some reserved for seed), and a separate $754 million fund — dubbed “Atomico Growth VI” — is for Series B through pre-IPO.
Raising and allocating money from separate funds is typical of many venture capital firms today, but Atomico closed two separate funds, led by separate teams, is notable. The firm has historically leaned toward earlier funding rounds while dipping into later stages where it made sense. Now it’s setting itself up to focus just as much on the later stages of a startup’s journey with a dedicated fund.
This move could also point to a trepidation among some in the investor fraternity who are hesitant to put money into fledgling pre-profit companies. By setting things up this way, it becomes easier for Atomico to bring contributions from more risk-averse limited partners (LPs) into the fray by enabling them to channel their cash into tried and tested businesses, rather than backing a single fund that may span anything from seed to Series F.
The news also comes amidst a downturn in the global venture capital sphere, a trend Europe has not been impervious to.
One of the things that Atomico has built a reputation for in the investment world are its annual research reports on the state of the European technology ecosystem, which focus in particular on how the venture capital end of the market is faring. Its most recent report made for grim reading, noting that admidst an ongoing downturn, European startup funding halved in 2023, driven by factors such as geopolitical events, inflation, and interest rates. It also determined that the market, and investment data, had been skewed by 2021 and 2022, which (because of Covid-19) were significant outliers for revenues, funding and valuations due to a surge in demand for certain kinds of technology, among other factors.
European VC funding last year was actually slightly above pre-pandemic figures. An optimist would interpret that as a sign that the tech market may be on better footing than the darker data might suggest. Q2 2024 data could support that thesis, as would a swathe of new funds from several prominent VC firms in the region. Back in May, Accel announced a fresh $650 million tranche for early-stage startups, while more recently Balderton unlocked $1.3 billion across two new funds — $615 million for early-stage, and $685 million for growth-stage.
Falling short
Founded in 2006 by Skype co-founder Niklas Zennström, Atomico launched initially with a $73 million fund, and in the near two-decades since it launched a $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 surpasses the previous by more than 50%. However, Atomico’s sixth fund stands out given its two distinct areas of focus — something that may also inadvertently tell a story in terms of where investors’ heads are at, given that one of the funds failed to reach Atomico’s funding target. According to filings with the Securities and Exchange Commission (SEC) last year, Atomico was seeking $600 million and $750 million respectively for its venture and growth funds — this means that while it marginally surpassed its target on the growth side, Atomico fell short of its venture target by nearly 20%.
On the one hand, it makes more sense for Atomico to allocate more cash to later stage companies given that its portfolio of investments has grown over time — what were once early-stage companies are now in full scale-up mode, requiring more money than ever. On the other hand, falling short of its funding target for earlier-stage startups is indicative that less investors are willing to back fledgling companies than Atomico had hoped.
Atomico says that it has already made some 21 investments across both funds, including several from Atomico Growth VI into its portfolio including DeepL, and Pelago, as well as leading on the Series B round of Corti. In the earlier-stage realm, Atomico Venture VI has plowed cash into Neko Health, Ben, Dexory, Deeploi, Strise, and Lakera, dating back to when the fund first opened in early 2022.