Balderton Capital — one of the older, larger, European VCs noted for investing in Revolt and Wayve — has raised a fresh $1.3 billion in total, spread across two funds. Its Early Stage Fund IX will get $615 million, and its Growth Fund II will get $685 million. The news was greeted with cautious optimism by the VCs TechCrunch spoke with. 

It’s also a further indication that European VC is picking up after a lackluster couple of years following the ZIRP and post-COVID-driven bull-run of 2021 and2022. 

Indeed, the London-based Balderton pointed to research that said European VC funds have outperformed VCs in the U.S. over 10- and 15-year periods, based on data from both Invest Europe and Cambridge Associates. 

In an interview with TechCrunch, partner Suranga Chandratillake said the raise had gone relatively smoothly: “We raised [these funds] faster than we’ve ever raised them before. It was about 80% reupping of existing LPs.”

He said the fund has also raised from a large, but unnamed, U.S.-based institution: “What we’ve heard a lot is that European venture feels like a proper, solid, here-to-stay, part of the industry VC globally, which obviously seems like old news to me or to you, but it’s amazing how long that takes, in a global sense, to really permeate into everybody’s way of thinking about the world.”

In fact, European AI startups Mistral, Wayve and Poolside AI now account for 18% of all European VC funding, according to Dealroom. Balderton’s fundraise follows raises by other VCs in Europe, including Accel’s European arm, Index Ventures and Creandum.

In the last 12 months, Balderton has announced 12 new investments: Checkly, SAVA, Tinybird, Qargo, Huspy, trawa, Payflows, Scalable Capital, Lassie, Writer, Anytype and Deepset. 

However, the firm’s Europe-only focus means it has largely missed out on investing in the “foundational” wave of AI start-ups out of Silicon Valley, such as OpenAI and Anthropic. These have ben backed by giant US firms such as Andreessen Horowitz, Sequoia Capital, and Lightspeed Venture Partners, all of which now have London offices. 

Balderton has singled out London and Paris as key innovation centers. But despite having Bernard Liautaud, a Frenchman, as managing partner of the fund, Balderton didn’t opt to back the Paris-based Mistral. 

“We think Mistral is a great company and there’s nothing negative about about the team or their mission,” Chandratillake told me. “We think it’s a hard investment for a more early-stage focused VC like ourselves because it’s the kind of company that will have to raise huge amounts of money to stay up with the leaders. If you are early in those sorts of companies, you get really squashed. You won’t have the firepower to keep going, to write checks of hundreds of millions of dollars. And so you get squashed in the cap table, you lose your relevance, you lose your board seat, etc, etc. So it was not necessarily a good fit for our kind of fund. That doesn’t mean it isn’t a great company. It just isn’t a very good fit for us.”

Is the strategy instead to watch the whole AI field play out and pick off the emerging companies? “We believe in foundational models, and we believe that there should be a healthy market of those. But we think that the amount of capital required to build a great foundational model is colossal, [and better suits] private equity firms, hyperscaler public companies that are printing cash in their core businesses,” Chandratillake said.

“We do think there are a lot of interesting companies that are going to get built that use this technology in different ways to solve very, specific, problems and that’s where you’ll see a lot of our dollars going. Wayve is in our portfolio, and they have raised the largest single round of any AI company in Europe. So I think we feel pretty good about AI.”

TechCrunch also spoke to other VCs to gauge industry opinion about the raise. 

Brent Hoberman, founder of firstminute capital (a $400 million AUM seed fund) said: “It’s very encouraging for Europe, especially the pure Europe focus and the stats regarding Euro VCs outperforming the US. Europe riding on top of foundation models heavily funded from USA is valid, too.”

Susanne Najafi, Founding Partner BackingMinds VC in Stockholm, said: “It’s great. More capital for European startups — both early and growth. Regarding growth, we’re a firm believer that it will be easier for growth startups to raise their rounds here versus relying on U.S. funds for that. That might still be relevant + value adding, but now European growth funds can compete to a larger extent.”

Another unnamed VC, who wanted to remain anonymous for fear of market repercussions, said he backed Balderton’s decision not to invest in Mistral: “I believe Balderton has always had a very realistic, almost calm view on things … They might not be the most fancy brand, but they are certainly the one that returns money. They likely missed out on hundreds of outliers over the years, but chose many great ones to create a diversified portfolio. I would call them sober decision-makers. And big institutional investors want this, along with repeat business. Investing in Balderton is akin to investing in Revaia, Highland and Verdane.”

However, not everyone is so impressed. Andrew J Scott, Founding Partner 7percent Ventures said: “What’s critical is that European Series-A plus managers have the guts to back really big foundational technology bets, not only software layer applications which show established revenue. If they don’t, the U.S. will control AI, space and robotics for the next 30 years in the same way in controls the web, search and cloud compute today.”  

This story was updated to include another quote from a VC about Balderton’s decision not to invest in Mistral.