Index Ventures, the firm that backed companies including Playfish Inc. and Skype Technologies, raised 500 million euros ($690 million) in its largest ever fund as it expands investments across Europe.
About two-thirds of the fund will be invested in European startups with the remainder used in the U.S., Index Partner Saul Klein said in an interview. The Geneva-based company will invest an average of 25 million euros in a financing round.
“Previously there’s been a lot of negative sentiment towards the prospect of European venture,” Klein said. “But when it comes to Europe, we’ve pretty much found a gem in every city.”
Index is increasing its focus on late-stage startups to take advantage of a increasing number of technology companies clustered across Europe. The company, which this year opened a satellite office in East London in the area known as Silicon Roundabout, has fully invested its smaller 2007 fund.
European technology startups are cheap relative to the U.S., where valuations have soared in the wake of Facebook Inc., Twitter Inc., and Zynga Inc. Last year, deal values in Europe stood at a pre-investment average of $5 million, compared with $15 million in the U.S., according to Ernst & Young LLP. In the first quarter, valuations in Europe rose 20 percent to $6 million while the U.S. saw a 40 percent surge to $21 million.
Index, which moved two partners to San Francisco in July, last month led an investment in Dropbox Inc., a Web storage provider with more than 45 million users. The total $250 million investment was the fifth-largest financing round this year.