European venture capital firm Atomico raises $1.1bn to defy tech slowdown

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European venture capital firm Atomico has raised $1.1bn worth of new funding to invest in start-ups, defying a broader slowdown in the tech industry.

The London-based group has raised the fresh money across its new venture and growth funds, according to US regulatory filings, nearing its goal of $1.35bn for both vehicles.

The new capital comes at a time when VCs have found it harder to raise funding as higher interest rates and falling public valuations for start-ups have led investors to retrench.

European venture capital funding for start-ups slowed in the first half of this year, with the total value of such deals down more than 60 per cent compared with the same period in the year prior, according to research from PitchBook.

In the second quarter, the amount invested by European VCs was down 40 per cent year on year to around $20bn. In North America, investment nearly halved over the same period to $42bn.

Atomico was set up in 2006 by Skype founder Niklas Zennström and has established itself as one of Europe’s most prolific tech investors, having backed more than 130 start-ups.

It has invested in companies including Klarna, the buy-now-pay-later financial technology group, and Lilium, an electric flying car start-up. Atomico, which has $5bn under management, previously raised $820mn for its fifth fund in 2020.

“I thought there was such potential in Europe for more companies like Skype to be created. Let’s break the [Silicon Valley] monopoly. We could build the same thing or even better in Europe,” Zennström recently said in a Lunch with the FT interview.

Atomico’s new funding ranks among the largest such hauls this year in Europe. In January, the VC firm Highland Europe closed its new €1bn fund, while last month the London-based software investor Dawn Capital raised $700mn.

Venture capitalists have had to navigate a number of challenges over the past 18 months, including rising inflation. Private market valuations on several prominent start-ups, such as Turkish delivery company Getir, have been dramatically marked down to reflect tough macroeconomic conditions.

Hampering the fundraising market for venture capitalists has also been a dearth of initial public offerings, which are a key route for such managers to exit their investments and generate returns for their institutional backers.

Choppy IPOs last month for a few prominent technology companies in the US, including the online grocery delivery company Instacart, have damped hopes for a rebound and led venture capitalists to advise start-ups to postpone listings until interest rates in the US begin to plateau.

Atomico declined to comment.