Financial Times: Europe’s start-up backer looks to the next wave
The company has backed Skype, Supercell and Deliveroo — now it wants to grow a Google
Financial Times' European Technology Correspondent Madhumita Murgia meets a technology venture capitalist focused on growing the next Google-sized company. This story was published in the FT on Monday, 28 November 2016.
When Neil Rimer was an aspiring medical student at Stanford University in the early 1980s, he fell in love with start-ups, all because of a gadget.
He was so fascinated by a friend’s North Star word processor that he begged to borrow it to write up his biology papers. In return, he helped his friend read through dozens of business plans for NEA, a venture firm in Silicon Valley. He enjoyed this moonlighting so much that he swapped his science courses for economics and a three-decade career investing in young start-ups.
Index Ventures, the firm he founded in 1996, was born in Geneva, where Mr Rimer’s family has always lived. Today, it is Europe’s premier venture capital company, backing its most successful start-ups, from Skype and Asos to Deliveroo and King, the makers of Candy Crush. This year it turns 20.
The company has raised $5.6bn since it was founded, and has 12 billion-dollar companies in its portfolio. Seven of its start-ups — including Just Eat and Supercell, the games developer behind Clash of Clans — completed billion-dollar-plus public offerings or acquisitions in the past two years.
Index now has dual headquarters in London and San Francisco. There are 35,000 employees at 160 Index-backed companies globally. Together, they generate $9.2bn in annual revenues.
The quiet, bespectacled 52-year-old greets the Financial Times in Index’s Mayfair headquarters displaying none of the braggadocio one might expect of a financier who takes big risks. He offers a tour of the office — a clean, minimalist warren furnished with Eames chairs. A design enthusiast, Mr Rimer admits that in another life he would have been an architect.
“Teaching machines like 3D printers to design things, that fascinates me,” he says. “These designs don’t look like anything a human could make, they’re from a different planet.”
We all exercise our brains as cynics every day, we’re all experts in what happens when things go wrong, but for me, the more valuable exercise is: what happens if it does work?
Mr Rimer’s curiosity about new technologies is the reason his projects, ranging from mobile gaming to agricultural insurance, are diverse. A colleague describes him as “the most insanely curious man … Just look at a cross-section of his investments. There’s no other way to stay at the top of your game for two decades.”
But to survive as a venture capitalist takes more than curiosity. You must thrive on extreme risk. “We all exercise our brains as cynics every day, we’re all experts in what happens when things go wrong,” he says, describing how his team makes its bets.
“But for me, the more valuable exercise is: what happens if it does work? Those are obviously rare but every time we’ve made an investment in a company that’s been transformative, it’s been because we’ve been excited about the potential of things going right.”
As Mr Rimer says, start-up failure is commonplace. This month, Nasty Gal, an e-commerce and fashion company that Index invested nearly $50m into in 2012, filed for bankruptcy, and Mr Rimer’s brother Danny — also an Index partner — stepped down from the board.
Stockholm-based virtual doll start-up Stardoll, another Index portfolio company, nosedived from almost 30m to 3m monthly users within the past three years, unable to adapt its technology to mobile phones. This year, its chief executive bought out all his investors, including Index.
“We try to support entrepreneurs as long as we feel they have a shot at bouncing back,” Mr Rimer says, “but there comes a time with any company when the evidence is pretty clear.” Internal postmortems reveal a pattern: “It’s often because people don’t react quickly enough to the writing on the wall.”
Even agile start-ups find it hard to change direction or replace executives, he says. “There is still too much inertia in management teams and boards.”
When Mr Rimer set up Index in Geneva with two partners — his second brother David and their friend Giuseppe Zocco — venture capital had not yet made it to Europe. “We started every meeting with a slide that was literally ‘What is VC?’,” he says. Before Index raised its first $18m, he spent three years gathering money on a deal-by-deal basis, trying to convince pension fund managers, insurance companies and asset managers to take a chance.
“We’ve always had a big cohort of US institutional investors as well, and there the slide wasn’t so much ‘what is venture capital?’, but ‘what is Europe?’,” he deadpans. For him, that lack of maturity made Europe a more exciting opportunity than the US at the time, though with hindsight he says he was naive to believe Silicon Valley had peaked.
The European tech sector is yet to produce a success story on the scale of Google or Facebook, but he reasons that it is still callow. “Silicon Valley is two or three times older than European tech. Europe is a complicated place, it isn’t a single integrated market and becoming less and less so.”
Which companies does he bet on becoming big? “Could be Spotify, [Dutch payments processor] Adyen or a number of others,” he says. “It is a function of the entrepreneurs now having a level of ambition and confidence to say no to acquisition offers.”
Despite Index’s multicultural staff — its 10 partners come from seven different countries — not one partner is a woman. “We’re not proud of that. But it’s still very much a male-dominated industry,” he says. “We need to be called out on it. It doesn’t feel like a reflection of who we are as people.” He is committed to having at least one woman in the final two for the company’s next partner: “We will fix it, it’s a matter of time.”
Mr Rimer is looking to the next wave of change, moving from industries like entertainment to sectors such as healthcare and insurance. He wants to invest in businesses that will thrive in a world where real estate is freed up because cars drive themselves, and people extend their working lives. “We can rethink all the assumptions that have constrained or restricted us.”
Second opinion: The peer
“I’ve worked closely with Neil for almost six years,” says Samir Desai, CEO of Funding Circle. “He’s been incredibly supportive of Funding Circle, and on our board since February 2011.
“In the early days he was a mentor, but he has become a strategic soundboard for new ideas. Running a start-up is full of bumps. He’s the person who will tell us things aren’t working.”
“He’s very straight, the kind of guy with nothing [complicated] going on behind the scenes.”
Financial Times, Author: Madhumita Murgia, Published 28 November 2016. Used under licence from the Financial Times. All Rights Reserved.