Atomico closes largest European venture fund

At $765m, Atomico IV is substantially larger than its predecessor to ‘take on bigger challenges’ and ‘solve bigger problems’.

Tech-focused venture capital firm Atomico – set up by Skype founder Niklas Zennström – has closed its fourth fund above target on $765 million after less than a year on the road, according to a statement from the firm.

Launched in March 2016 and originally targeting $750 million, Atomico IV is the largest European-focused independent venture fund ever raised.

The vehicle is considerably larger than its predecessor, which closed on $476.6 million. Co-founder and partner Mattias Ljungman told Private Equity International that the fund’s size was dictated by opportunities in the market, and that “more and more capital” is required to scale companies.

“The cheque sizes are going up,” Ljungman said, adding that a decade ago cheque sizes for Series A were up to 10 times smaller than they are today.

“You’re taking on bigger challenges; you’re solving bigger problems” such as challenges within the healthcare, education, finance, property and transportation sectors. “These are huge sectors, and so the capital requirements have become bigger.”

Atomico’s typical cheque size for a Series A round is between $3 million and $10 million.

“That’s really the beginning of the journey for us,” Ljungman said. “We’re investors who like to support our companies, so when they go on to raise another round, there’s again more capital that is deployed.”

Atomico will look to make around 25 core investments in Fund IV, Ljungman said. The firm has already started investing, making Series A or B commitments to nine businesses.

Ljungman said European venture capital is underfunded, with five times more capital available to founders in the US than in Europe.

“At the later stages, that number increases to about 12 times,” he said. “If you look at the size of funds in the US and also in China, they’re very, very different fund sizes.”

The majority of investors in the fund have previously committed to Atomico funds, but there are some new investors.

“[Investors] are seeing [that] the returns coming from venture are becoming more and more interesting, because this is really the engine of growth in our future economy,” Ljungman said. “What they’re thinking about is how are they going to be part of this transition that’s happening at the moment across the economy.”

Ljungman declined to disclose the GP commitment, but said that it has “always been [Atomico’s] model” to have a “very significant” GP commitment.

“Together, we’re going to benefit from the returns more than anything else,” he said.

Ljungman declined to comment on the performance of previous Atomico funds.

Atomico has a strong focus on value creation; of the 15 partners at the firm, seven focus on value creation while the remainder work on investments. Its value creation team is made up of former executives from fast-growing tech companies, including Facebook, Google, Spotify and Uber.

Ljungman said that while there are some challenges to investing in venture across Europe versus a single market such as the US, this also holds opportunities.

“European companies immediately think about being multinational, multilingual and multiregional. If you have the mind-set that you want to become a global leader, those are inherent characteristics that allow you to get even further.”