Balderton raises £285m fund, but don't expect much for your early stage startup

London-based Balderton Capital has announced it has secured a new £285 million ($430 million) fund to invest in technology and media startups in the downturn. Amazingly, despite the banking crisis, Balderton got the new fund together in only two months, which indicates that Balderton’s limited partners like its track record. Balderton made $140 million from the sale of Bebo to AOL and had 15 percent of MySQL which went for $1 billion to Sun Microsystems last year. Plus, their backers must agree with its view that the wider media business will go through profound change in the next few years. BC will clearly invest in companies that can disrupt faster than the entertainment/media business can adapt, such as in digital delivery, gaming etc.

However, when I asked Balderton for more detail about the announcement, and whether they would invest in early stage startups, they came back with this: “The new fund will invest mainly in early stage (ie investments fro $5-10 million) but will also look at later stage companies.” Reading into that, this clearly means the Sub-$1m/£1m investment market – which arose during the most recent Web 2.0 era – will effectively be dead to Balderton. So ‘true’ early stage, i.e. bootstrapped startups will have to be already on the road to revenue to catch their attention.

In short, don’t expect much love. A contact of mine close to the company told me just before Christamas “2009 is going to be terrible for startups.”

In 2008 Balderton went mostly for $5 million Series A round investments and above (from Crunchbase). In 2008 it invested in:

Big Fish Games: Unattributed
GreenRoad Technologies: Series C, $14.5M
Metaversum: Angel Series A, €6.5M
Adjug: Series B, $6.5M
betNOW: Series A $5M
7digital: Series A, $8.5M

Publicly, Balderton is upbeat. Barry Maloney told the Financial Times:”We are about to enter a very interesting time for new investments, if not for exits. Part of the reason for raising this fund now is to take advantage of the opportunities that this stage of the cycle throws up.” Balderton’s thinking is evidenced by the fact that it invested in Lovefilm which will benefit from film fans avoiding high prices at cinemas. Balterton’s Barrry Maloney also told the FT there would be “some casualities” in its portfolio and made the totally safe prediction that there would be VC-backed IPOs in the next 18 to 24 months.

Balderton’s other investments include 7digital, Figleaves, Newbay (social software for mobile operators), Habbo Hotel and Adjug. It has also invested in Big Fish Games (a game development studio) and Metaversum which operates the 3D online world Twinity, which mashes up the real with the virtual world. It’s also backed the Betfair gambling website and Setanta pay-TV broadcaster.

This is London-based Balderton’s fourth fund, having raised US$550m in December 2006, US$375m in July 2004 and US$500m in May 2000.

In Europe the “Big Five” pan-European VCs that remain are Balderton, Accel, Atlas, Wellington and Index Ventures. Among the other venture ‘players’ in London are Advent Ventures and DFJ Espirit. 3i pulled out of early stage last year and and Apax Partners long ago.

However, the thinking is that venture capital will come back into back into favour as private money is switched from bad banks, low interest rates and the difficulty of financing big buy-outs of firms which rely more heavily on debt.

Plus, last month Accel Partners raised $1bn for two new technology and media-focused funds in the US and Europe.