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Get to know the market now with Danny Rimer of Index Ventures – TechCrunch


If you’re feeling confused about the state of startup investing, join the club. Shares of public companies have suffered a steady decline in recent months amid growing recession fears, however, funding for startups still seems to be growing faster and more surprising than ever. For us, VCs are still regularly announcing massive new funds as they have for years.

To better understand what’s going on, we spoke this week with Danny Rimer, co-founder of Index Ventures, who grew up in Geneva, where Index has offices, but now splits his time. between London and San Francisco, where Index also has offices. (Merely open office in New York as well.)

We stumbled across Rimer – whose bets include Discord, 1stdibs, Glossier and Good Eggs, among others – in California. Our conversation has been slightly edited for length.

TC: This week, Lightspeed Venture Partners announced 7 billion dollars through several funds. Battery Ventures said it closed on 3.8 billion dollars. Oak HC/FT announced almost 2 billion dollars. Typically, when the public market goes down, institutional investors are less likely to commit to new funds when the public market goes down, so where does this money come from?

DR: That’s a good question. I think we should remember that there have been extraordinary achievements for a lot of these organizations over the last few years – let’s call it really the last decade. And their position also really mushroomed during this period. So what you’re seeing is an allocation for funds that may have been around for a while. . . . and has actually been very profitable over the years. I think investors looking to put their money into institutions understand how to allocate this new source of money across any given market.

These amounts keep getting bigger and bigger. Are there new sources of funding? It is clear that we have seen sovereign wealth funds play a larger role in venture capital funds in recent years. Does Index look further than before?

There’s definitely been this split in the market between funds that are probably more in the asset pool business and funds that are trying to continue to take the risk and we’re playing in the second camp. So, in relative terms, our fund size doesn’t become significant. They haven’t grown significantly, because we’ve been very clear that we want to keep it small, keep our craft alive and continue down that path. That means when it comes to our institutional investor base, first of all, we don’t have any family offices and we don’t accept sovereign wealth funds. We’re really talking about endowments, retirement funds, nonprofits, and funds that make up our investment base. And we’re lucky enough that most of those people have been with us for almost 20 years now.

You have quite a bit of money under management, you announced $3 billion in new funds last year. That is not a small amount.

No, it’s not trivial, but relative to the funds you’re alluding to – funds that have grown a lot and have done sector funds or cross funds – if you look at how much the Index has raised [since the outset] compared to most of our colleagues, it’s actually a very different story.

How much yes The index rose in the company’s history?

We should check. I wish I could have an exact number on the tip of my tongue.

It’s a kind of refresh you don’t know about. Now you are in the market? It seems like a year has passed in terms of fundraising for most companies and this has not changed.

We do not enter the market to raise funds. we to be clearly in the market to invest.

We are starting to see a lot of companies reset their pricing. Are you negotiating with companies in your portfolio about doing so?

We are having all kinds of discussions with companies in our portfolio; nothing is off the table. We absolutely do not want to be suspicious when looking at the reality of the situation. I wouldn’t say that’s a general discussion we’re having with all of our companies. But we always try and make sure that our companies understand the current climate, the conditions specific to them, and make sure they are as realistic as possible when it comes to their future.

Depending on the company, sometimes valuations have gotten ahead of themselves and we can’t count on cross-funds coming back. . . they must protect their public positions. So some of these companies have both weathered the storm and made sure they’re prepared for the tough times to come. Other companies really have the opportunity to approach during this period and capture a significant market share.

Like one a lot of VC, you say you’d rather a startup conduct an ‘exit round’ than agree to tough terms to maintain a particular valuation. Do you think the founders received the memo that discount rounds are acceptable in this climate?

It really depends. I think you might have some beginner funds at this stage – you have some new field funds – which makes it complicated because [they’re] do not invest in the best business. [They’re] invest in the best business or try to fund the best business in that field. So perhaps there is some pressure on some VCs being felt by some entrepreneurs.

I want to emphasize that not all companies need a cold shower in regards to pricing. There are many companies that are doing very well, even in this environment.

Fast, an online sign-in and payments company, briefly closed earlier this year, and the Index was classified online a bit for quickly removing the company from its website. What happened there, and in retrospect, what more could Index have done in that situation? I guess your team did an autopsy on this one.

I didn’t know we took it down from our site. I guess it’s probably there but it’s probably harder to find, that’s what I suspect. We promote companies that are doing well.

You’re right, we looked at it as a company and really tried to draw lessons from it. There are a number of factors that we’re still working on or we can’t know but perhaps what’s been difficult during the COVID process is really assessing talent and understanding the people we’re working with. And I am sure that my partners who are responsible for the company will be able to spend more time and really understand the company’s business culture in more detail if we can spend more direct time with them.

(We’ll have more from this interview as a podcast next week; stay tuned.)



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