Daniel Waterhouse, Partner at Balderton Capital spoke to Kreos about the attractions of European markets as Balderton begins to deploy its fifth fund. 
Balderton was founded in 2000 by Benchmark Capital as Benchmark Europe.  Their name was changed to Balderton when they became independent in 2007.  Balderton has since built a track record of investing in over 100 fast-growing companies  – and has over $2 billion of committed capital, across multiple stages and industry sectors. 
Daniel joined Balderton as General Partner in 2013 and has over 14 years’ experience investing and working with European fast-growing internet service companies.  He spent five years as a partner at Wellington Partners, where he led investments in 11 companies across Europe and sat on the board of  many of them,  including Hailo, YPlan, SumAll, EyeEm and Qype. Before joining Wellington, Daniel was a partner at 3i focusing on the internet sector in Europe and North America. Prior to 3i, he was at Yahoo for six years from 1999, covering strategic development and M&A across the European region.
Over the years, Kreos has provided growth debt and worked closely on nearly 20 Balderton-led transactions, including:
¨ ACHICA – Kreos provided €5.5m of growth debt financing in three separate tranches to help accelerate the company’s product and geographic expansion.
¨ LoveFilm – Kreos provided £18.5m of working capital and acquisition finance over a three-year period, supporting the company from Series A through its growth rounds and creation of the European DVD rental and video-download market.
¨ Bookatable – the European leader in online restaurant booking with over 10,000 restaurants and a recent partnership with Michelin, where Kreos provided €8m of growth debt financing.
¨ Qubit РKreos has provided €1.2m of growth debt financing to this company focusing on using technology to improve online profitability via machine learning, statistical analysis and high performance computing.
Congratulations on your new Fund V: tell us about the general focus of the fund? 
The new fund, which was announced in April 2014, is called Balderton V with committed capital of $305 million.  It is a continuation of our strategy from Fund IV focusing mainly on European based entrepreneurs building high-growth and often global technology companies.
We have a diverse group of partners so we will invest across a wide range of opportunities including fintech, mobile, machine learning, SaaS, market places, gaming, e-commerce and much more. We have also made a recent investment in the consumer hardware space and are intrigued by the generation of capital light hardware start-ups. We expect to invest in roughly 20 to 25 companies during the life of the fund, of which 6 have already been announced and several more are in the works.
What are the most attractive sectors at the moment across Europe and where are you focusing the Fund V investments?
First, in general, it is very encouraging that we are seeing more and more experienced management teams as well as  more well-rounded teams that are  in  their  late 20s/early  30s  and  still have just enough naiveté to be crazy enough to take on the world but also have the experience, focus and knowledge of how to build and run successful companies. From a sector perspective, again many of the deals that we have done so far are in fintech (like GoCardless, which is a mobile payments platform simplifying online Direct Debits) and Motif Investing (investments in intelligently weighted baskets of stocks based on ideas).
We also have invested in some very interesting e-commerce businesses (like Tictail, the free-to-use DIY e-commerce platform based in Stockholm), marketplaces (like Carwow, which is a platform to help buy new cars from franchised dealers), education (language learning from Memrise) and travel (effortless hotel search with Top1). We have also just invested in Roli which is a London based company whose first product is a new musical instrument with a revolutionary haptic control interface.
Another space we are investing in is 3D printing, where Balderton has two investments: 3DHubs, a market place for people to find 3D print locations, and Sketch Fab, which is a 3D asset distribution channel.
We also really like the innovations happening around machine learning and Big Data. Since our original investment in Natural Motion, we have invested in Qubit, which is a sophisticated website optimisation platform using big data analytics, and TrademarkNow, the automated trademark search and risk analysis company which is using sophisticated machine algorithms to do trademark analysis.
Certainly for Balderton hardware is coming back into our area of focus with the rise of rapid prototyping hubs, supply chain support and fulfilment and so on, and we are working on several things in this arena.
What areas do you see coming into sharper focus over the next couple of years?
We are looking at exciting opportunities in areas like self-improvement, crypto-currency, healthcare, education and robotics amongst many others.
How do you see growth debt being used going forward to help your Fund V investments?
First, you can tell by the companies mentioned in the beginning of our talk, that we have had a long and very successful relationship with Kreos.
We have nearly 20  investments together and Kreos has invested around €130 million over the years in Balderton-led companies across multiple funds. We have shared some great successes and both Balderton and Kreos share a DNA for integrity, patience and added value and have a long-term and flexible perspective.
We expect to continue to work with Kreos where it makes sense to add debt to portfolio companies’ balance sheets, which is typically when the equity investors and management do not want to incur additional dilution, or have clear visibility to reach specific milestones. In the stronger environment we are now entering we expect these opportunities to be plentiful over the coming years.
