European venture capital firm Index Ventures has led a €5 million ($7million) first round investment in Netlog, a social networking site.
Netlog, formerly known as Facebox, is one of Europe’s leading social networking sites with over 16 million users across 9 countries. It is already profitable thanks to its dual model of user payment and advertising.
The company was established in 2003 in Aalst, Belgium by co-founders Toon Coppens and Lorenz Bogaert. The Facebox website was launched in September 2006 and now generates 2 billion page views per month.
Bogaert, the chief executive of Netlog, believes the product is unique because it has been designed to operate in multiple languages – eight so far – and target a number of separate local communities.
Index said this was the main reason why it decided to back the business. The venture firm believes that creating local communities is critical to the success of any social networking site, since users will ultimately prefer to interact with people from their own community.
Index, which has also invested in other online communities like Stardoll and Last.fm, believes the social networking phenomenon is far from over – in fact the model “is only at the beginning of the curve” in Europe, according to a source close to the firm.
Index has previously backed some of European’s biggest technology venture successes, including Betfair, the world’s largest online betting exchange, and IP telephony business Skype, which was sold to eBay for $2.6 billion (€1.9 billion).
Skypeco-founders Niklas Zennström and Janus Friis also took part in the funding for Netlog, along with Saul Klein – an Index partner – and Robert Klein from The Accelerator Group. Zennström is investing through his company Atomico and Friis is doing so individually.