Benchmark cuts ties to Europe

Running counter to the trend of U.S. venture funds expanding internationally, Benchmark Capital has severed ties with its London-based affiliate, Benchmark Capital Europe.

Benchmark Capital Europe last month changed its name to Balderton Capital and is now operating as an independent firm.

Benchmark Partner Kevin Harvey played down the separation. “Our model since the beginning was to replicate what we had here in Silicon Valley, which means that they would be making their own decisions,” he told VCJ. Harvey adds that he expects the same kind of split to happen with the firm’s Israel office “at some point in the future.” (Benchmark Israel raised $250 million for its second fund in 2005.)

Benchmark’s move comes as other U.S.-based firms are building up their international networks. For example, Sequoia Capital opened an office in China last year and bought into Westbridge to get a foothold in India; Kleiner Perkins Caufield & Byers launched a $360 million affiliate fund in China in April; and Draper Fisher Jurvetson recently brought aboard a new managing director to expand its affiliate model and take it to even more countries.

There’s no merit to that concept [that Benchmark Capital Europe didn’t meet performance expectations]. The firm has done really well. If you talk to limited partners who are aware of the European venture capital situation, Benchmark Europe is thought of as the top of the heap.

Kevin Harvey, General Partner, Benchmark Capital

One source familiar with Benchmark speculated that the late stage-oriented Benchmark Europe was underperforming expectations of its early stage-focused counterpart in the United States.

“There’s no merit to that concept,” says Harvey. “The firm has done really well. If you talk to limited partners who are aware of the European venture capital situation, Benchmark Europe is thought of as the top of the heap.” Harvey points to Benchmark Europe’s investment in online betting company Betfair. Benchmark Europe and Index Ventures sold a stake in Betfair worth nearly $643 million to Softbank in February.

Balderton has raised more than $1.4 billion for three funds since its 2000 inception, and has invested in more than 70 companies. Most of them are in the United Kingdom or continental Europe, but the firm has also invested in a few deals in China and the United States (as part of co-investments with its Silicon Valley counterpart). The investment arrangement has worked the other way, too, as Harvey is chairman of MySQL AB, a Swedish open-source database company.

In a formal statement, Balderton Partner Barry Maloney said: “Independence, combined with a continued strong network of co-investment and affiliation with Benchmark, is the right way to move forward for our investors and our entrepreneurs. More doors and options will be open for each team, even as our relationships with each other remain strong.” Since its inception, Benchmark Europe has operated mostly as an autonomous firm. It never held regular partnership meetings with its U.S-based parent. Also, a shared carried interest arrangement was whittled away to nothing in the $550 million Benchmark Europe III fund that closed late last year.“So far, [Balderton] has done pretty well,” says Neil Rimer, a general partner at Index Ventures, which has co-invested with Benchmark. “It’ll be interesting to see how they’ll do without the Benchmark name.” —Dan Primack and Alexander Haislip