Privately Speaking: Sonali De Rycker of Accel Ventures

European venture has disappointed investors for a decade. But many believe the prospects for this segment of the market have never been better – and funding is starting to concentrate around a few managers who seem to have the models to take advantage. Accel Partners’ European arm, which has just closed a $475m fund, is emerging as one of the best of its breed – and in Sonali De Rycker, it boasts a partner described in some quarters as ‘the best VC in Europe’. James Taylor went to meet her, to ask why LPs should believe that this time will be different…

In the 10 years to the end of 2011, European venture capital funds delivered to their LPs an average net IRR of -0.94 percent. In the five years to 2011, the return was slightly better: -0.14 percent. That’s according to the industry’s own trade body, the European Private Equity & Venture Capital Association. To put it bluntly: as an asset class, European VC has stunk the continent out for a decade.

So it’s understandable that some institutional investors have come to the conclusion that in these risk-averse times, they’d be better off hiding their cash under a pillow than backing a new venture fund.

But is it the right call? That’s a moot point. Those venture firms that have made it this far will tell you that there’s never been a better time to invest in European venture – and that the biggest problem is that investors will not trust them with enough cash to prove it. Total capital raised by European venture funds has been in steady decline for the last five years, according to data from PEI’s Research & Analytics division: almost $10 billion was raised in 2008, but the 2012 total was less than $1 billion. 

One firm that has no shortage of firepower is Accel Partners, which in March closed its fourth European fund on $475 million. Founded in Silicon Valley in the early 1980s, Accel only opened a London office in 2000, and still only has four partners here. This group has been set up very deliberately to operate independently from the mothership: they raise their own funds and make all their own investment decisions. But they also sit within a genuinely global platform, with strong links into the best companies in Palo Alto – a nice USP in a world where the best entrepreneurs have global ambitions. 

PEI went to ask partner Sonali De Rycker why Accel succeeded where others have failed – and what it means for the future of the asset class in Europe.