Europe's Index takes on Silicon Valley VCs

By Philipp Gollner and Eric Auchard

SAN FRANCISCO (Reuters) - A new class of European entrepreneurs with a greater appetite for risk is helping regional venture capitalists compete with Silicon Valley, the co-founder of Geneva-based Index Ventures said on Tuesday.

Giuseppe Zocco, whose venture capital firm backed Internet telephone company Skype before eBay Inc. (EBAY.O: Quote, Profile, Research, Stock Buzz) bought it in 2005, says he now has a regular seat in some of the hottest technology deals from Israel to California.

Index, which Zocco founded a decade ago, has sought to blend European technology expertise with risk-taking that historically has been lacking in old world finance. About 80 percent of its business is in Europe, Zocco said.

"We wanted to be a Silicon Valley-like firm based in Europe," Zocco said at the Reuters Venture Capital Summit in San Francisco.

European venture capitalists raised about 12.6 billion euros last year, up 44 percent from 2004, according to Thomson Venture Economics. Solid demand for IPOs and mergers in the region have also helped contribute to a healthy climate.

While in the past European executives often could count on a lifetime of employment at their company, today cost-cutting forces them to look at other opportunities such as venture capital, Zocco said.

"Europe has a stronger equity culture than before" the technology bubble burst beginning in 2000, he said. "We're actually seeing a lot of shift from career executives to startups."

Firms Index's success comes at a time when many venture capitalists complain it is harder to build breakout success stories from start-ups due to a lackluster market for new stock offerings.

Like Silicon Valley's entrepreneurs, Europe's relatively young venture capital industry is focusing on the Internet as a vast marketplace for social networking, telephony, sporting events and even gambling, Zocco said.

Index now frequently partners with major California names like Sequoia Capital or Benchmark to create deals designed to be global at the outset.

One of Index Venture's recent investments is Stardoll AB, a Stockholm-based Web site that lets young girls dress up dolls in a kind of virtual fashion show.

Index Ventures also owns a stake in MySQL AB, a Swedish company that provides open-source database software, and is considered a hot IPO candidate.

Oslo-based Trolltech, whose Linux software is finding its way into a new generation of mobile phones from Motorola and others, received funding from Index Ventures and has recently , staged a successful public offering on the Oslo exchange.

Index Ventures typically invests $3 million to $10 million initially and as much as $20 million over the life of an investment.