Technology

In what looks like a European first, the London-based early-stage venture capital firm Balderton Capital is announcing it has closed a new $145 million &secondary& fund dedicated to buying equity stakes from early shareholders in European-founded &high growth, scale-up& technology companies.

Dubbed &Balderton Liquidity I,& the new fund will invest in European growth-stage companies through the mechanism of purchasing shares from existing, early shareholders who want to liquidate some or all of their shares &pre-exit.&

&Balderton will take minority stakes, between regular fund-raising rounds, making it possible for early shareholders — including angels, seed funds, current and former founders and employees — to realise early returns, reinvest capital in the ecosystem, or reward founders and early employees,& explains the firm.

The move essentially formalises the secondary share dealing that already happens — typically as part of a Series C or other later rounds — which often sees founders take some money off the table so they can improve their own financial situation and won&t be tempted to sell their company too soon, but also gives early investors a way out so they can begin the cycle all over again. Otherwise it can literally take five to 10 years before a liquidity event happens, either via IPO or through a private acquisition, if it happens at all.

&The bigger picture is there are lots of shareholders who either want or need or have to take liquidity at some point,& Balderton partner Daniel Waterhouse tells me on a call. &Founders are one part of that… but I think the majority of this fund is more targeted at other shareholders — business angels, seed funds, maybe employees who left, founders who left — who want to reinvest their money, want to solve a personal financial issue, want to de-risk their personal balance sheets, etc. So we&re not obsessed with founders in this fund, we&re obsessed with many different types of early shareholders, which for many different reasons would like to get liquidity before the grand exit event.&

Waterhouse says that one of the big drivers for doing this now is that Baldertonanalysis suggests there is &a critical mass of interesting companies& that are in the growth stage: &businesses that have got a scalable commercial engine& and a proven commercial model. This critical mass has happened only over the last two years, which is why — unlike in Silicon Valley — we haven&t yet seen a fund of this kind launch in Europe.

&We think therenow about 500 companies in Europe that have raised over $20 million. That doesn&t mean they are all great companies but itan interesting, crude data point in terms of the scale they&ve got to. As a consequence, within that 500 we expect there to be quite a lot of interesting companies for this fund to help and we obviously have a pretty good lens on the market. Through our early-stage investing, and working with companies from the early-stage through to exit, and then obviously staying in touch with companies we don&t necessarily invest in, we have a pretty good sense of that from a bottom up perspective on how many opportunities are out there.&

He explained that there are three aspects behind the secondary funding strategy. First is that by investing via secondary funding, more companies will gain access to the &Balderton platform,& which includes an extensive executive and CEO network and support with recruitment and marketing. Secondly, it is good for the ecosystem as it will not only help relieve financial pressure from founders so they can &shoot for the next growth point& but will also let business angels cash out and recycle their money by investing in new startups. Thirdly, and perhaps most importantly, Balderton thinks it represents a good investment opportunity for the firm and its LPs as secondary liquidity is &underserved as a market.&

(Separately, one London VC I spoke to said a dedicated secondary fund in Europe made sense except in one scenario: that European valuations see a price correction sometime in the future promoted by the current trajectory of available funding slowing down, which he believes will eventually happen. &Funds are 10 years so they just have to get out in time,& is how said VC framed it.)

To that end, Waterhouse says Balderton is looking to do around 15-20 investments out of the fund, but in some instances may start slowly and then buy more shares in the same company at an even later stage. It will be managed by Waterhouse with support from investment principal Laura Connell, who recently joined the VC firm.

Struggling to see many downsides to the new fund — which by virtue of being later-stage is less risky and will likely command a discount on secondary shares it does purchase — I ask if perhaps Balderton is being a little opportunistic in bringing a reasonably large amount of institutional capital to the secondary market.

&No, I don&t think so,& he replies. &What we&ve seen in our portfolio is [that] the point in time when someone is looking for liquidity isn&t set on the calendar alongside when companies do fund raising. In particular as a company gets more mature, the gap between fund raises can stretch out because the businesses are more close to profitability. And so itnot deterministic. We want to just be there to help people who are actually looking to sell out of cycle in those points of time and at the moment have very little options. If someone wants to wait, they&ll wait.&

Finally, I was curious to know how it might feel the first time Balderton buys a substantial amount of secondary shares in a company that it previously turned its nose down at during the Series A stage. After pointing out that companies usually look very different at Series A compared to later on in their existence — and that Balderton can&t and doesn&t invest in every promising company — Waterhouse replies diplomatically: &Maybe we kick ourselves a bit, but we&re quite happy with the performance of our early funds and obviously we&ll be happy to add other new companies that are doing really well into the family.&

Facebook has said itfound &no evidence& that third-party apps were affected by the data breach it revealed last week.

Hackers stole account access tokens on at least 50 million usersby exploiting a chain of three vulnerabilities inadvertently introduced by Facebook last year. Another 40 million also may have been affected by the attack. Facebook revoked those tokens —which keep users logged in when they enter their username and password — forcing users to log back into the site again.

But there was concern that third-party apps, sites and services that rely on Facebook to log in — like Spotify, Tinder and Instagram — also may have been affected, prompting companies that use Facebook Login to seek answers from the social networking giant.

&We have now analyzed our logs for all third-party apps installed or logged during the attack we discovered last week,& said Guy Rosen, Facebookvice president of product management, in a blog post. &That investigation has so far found no evidence that the attackers accessed any apps using Facebook Login.&

&Any developer using our official Facebook SDKs — and all those that have regularly checked the validity of their users& access tokens & were automatically protected when we reset peopleaccess tokens,& he said.

Admittedly, Rosen said that not all developers use Facebookdeveloper tools, so the social network is &building a tool to enable developers to manually identify the users of their apps who may have been affected, so that they can log them out.&

Facebook spokespersonKaty Dormer said the company was &working on the tool now& but didn&t have a release date.

The breach also affected five million users in Europe, the company confirmed, where data protection laws are stricter and financial penalties are greater.

Under the newly installedGeneral Data Protection Regulation (GDPR), European regulators can fine Facebook up to $1.63 billion in fines — or four percent of its $40.7 billion in annual global revenue for the prior financial year — if itfound that Facebook could have done more to protect its users& data.

Want excitement Heresomething approaching that. TodayMicrosoft October event wasn&t exactly a blockbuster, but product lead Panos Panay did mention that this is the most new Surface products the company has crammed into one event.

There was a lot of stuff to get through in the hour or so — though the majority of the announcements were spec bumps to existing products. In fact, aside from new matte black paint jobs, you wouldn&t really be able to tell the difference here.

That includes the expected lack of USB-C ports on the new products. Itan odd choice, to say the least — though &oversight& is probably the more operative word here.

As anticipated, the Surface Pro, Laptop and Studio all got spec bumps here. Starting at $999, the Surface Pro 6 is 67 percent faster than its predecessor, by Microsoftcount. Therealso a 267ppi display and a stated 13.5 hours of battery life.

The new Surface Laptop (which has been my own personal favorite in the line) gets even bigger bumps. The device is 85 percent faster than the first-gen, courtesy of the 8th-gen Quad Core Intel processor, while the battery should get 14.5 hours on a charge.

The Studio, arguably the most interesting Surface product to date, features a screen that38 percent brighter, with 22 percent more contrast. Inside are Pascal graphics cards and a 2TB solid state drive.

The Headphones are easily the most interesting announcement of the bunch. One, because the company somehow managed to keep them under wraps until todayevent and two, because Surface Headphones are a bit of a bizarre addition to the line. Even so, I was pretty happy with the brief time I spent with them.

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