SAN FRANCISCO (03/08/2000) - The firm that brought out eBay and Webvan is going European. Benchmark Capital announced Monday that it would open an office in London - its first outside the San Francisco Bay Area. Two Benchmark partners will cover Europe, bringing the total number of partners to eight - and don't be surprised if the firm adds a few more soon.
As part of the expansion, Benchmark will raise $500 million to fund European Internet startups. "The central reason we thought of this isn't because there's an absence of capital - we've met with dozens of European financiers - but because we feel the Sand Hill Road practice of company-building is in demand over there," says Bruce Dunlevie, a Benchmark general partner.
Benchmark certainly isn't the first private equity group to look at venture investing in European Internet startups. Many investors believe that Europe is about to undergo the same sort of Internet-inspired boom that the U.S. is experiencing. Last year, the Washington, D.C.-based Carlyle Group raised a fund of roughly $400 million specifically for new European Net businesses.
Other U.S. firms, such as Atlas Venture and GE Equity, have stepped up their European investing activity. And U.S. investment banks have been staffing up their European offices to meet the growing demand for initial public offerings. Benchmark, however, is the first of the elite Silicon Valley venture firms to establish an official presence overseas, and it's a bold move.
The six partners pride themselves on the ability to informally bounce ideas off of each other and then close deals with lightning speed. It's not clear how that model will translate overseas, away from the original, tightly knit group.
Nor is it obvious how well Benchmark's style of working closely with entrepreneurs and taking big gambles will work in the tradition-bound European markets.
According to the firm's release, the new office will offer the same set of services as the old one offers in Silicon Valley - such as executive recruiting, refinement of corporate strategy and the development of corporate partnerships. Such services, it adds, can accelerate the time to market by months, if not years. In order to learn the Benchmark way, the new recruits will spend a few months in the home office, watching the founders at work. The challenge for them will be to duplicate the California office's chemistry - a phenomenon Dunlevie describes as "magical."
Although Benchmark says it has already selected its two new partners, the firm is waiting to identify them until they formally resign from their current positions. Dunlevie says an announcement of their names should come soon. The new office will operate independently from the Silicon Valley office, making its own decisions about which companies to finance. But the Benchmark partners expect some synergy. The two offices, for instance, can share intelligence about market developments and promising new technologies.
They may also assist each other in cultivating partnerships between European and U.S. businesses. The firm began thinking about a European office two years ago, but decided such discussions were premature, Dunlevie explains. About six months ago, the partners decided that the deal flow in Europe had grown to a point where it could sustain a Benchmark office. And the partners agreed that it made no sense to try to manage European startups from California.
"The model of people in California making investment decisions about companies in Germany won't work," Dunlevie says. The announcement comes several months after Benchmark raised a $1 billion fund, and Dunlevie expects that the firm will have little difficulty raising the new one. While all of the limited partners who participated in that fund will be able to join the European fund, some new European investors will also able to invest in the new fund as limited partners, Dunlevie says.