Accel raises $650 million fund to invest in European and Israeli startups

Venture capital firm Accel announced Tuesday it has raised $650 million in a new fund to invest in European and Israeli early-stage startups focused on artificial intelligence (AI) and cybersecurity. The funding is another sign that the venture capital market may be experiencing a rebound following two years of drought.

In a press release on Tuesday, Accel, known for its early bets on the likes of Facebook and music streaming service Spotify, said the new fund will be used to “support ambitious founders building global category-defining companies” in Europe and Israel.

The new fund will be Accel’s eighth since opening its London office in 2000. So far, Accel has backed over 200 startup companies in 20 countries in the region. The venture capital firm still has investments in over 100 companies.

The news comes less than a month after General Catalyst, another influential Silicon Valley VC firm known for backing hits like Stripe and Snap, closed a nearly $6 billion fund to invest in technology startups.

The European and Israeli venture capital scene is experiencing rapid expansion, as evidenced by the staggering investments totaling $66 billion in 2023. Despite this impressive figure, it pales in comparison to the $150 billion pumped into the United States during the same period, as revealed by Dealroom data. This growth trajectory is even more striking when looking back at the humble beginnings in 2003, when investments in the region amounted to a mere $1.1 billion, compared to the $17 billion amassed in the U.S.

“Now, there are more than 360 venture-backed unicorns across Europe and Israel, and the whole ecosystem has evolved from one that raised about $1 billion in capital to now $66 billion in 2023.”

According to data released by Dealroom last year, employees hailing from 248 venture-backed unicorns across Europe and Israel have fueled the creation of 1,451 new tech startups in the region.

Harry Nelis, general partner at Accel, highlighted the emergence of overlooked tech hotspots within Europe, regions that investors have yet to fully tap into but are teeming with innovation potential. He pointed to Lithuania and Romania as prime examples of countries witnessing significant technological successes. In Lithuania, for instance, the rise of Vinted, a secondhand marketplace, has propelled it to unicorn status with a valuation of $4.5 billion. Similarly, in Romania, UiPath has made waves with a staggering $10.9 billion valuation in the public markets.

Accel, on its part, anticipates channeling investments into approximately 25 to 30 companies from its latest early-stage fund, reflecting continued confidence in the region’s burgeoning tech landscape.

Nelis added the European tech ecosystem in particular has evolved in the nearly 25 years since it opened up its London office as a separate fund in 2000.

“AI is going to be a big platform shift that will probably run for the next 10 years and we expect to place a good number of bets in AI companies,” Nelis said. “The environment has dramatically changed since then,” Nelis told CNBC.

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