Benchmark fills its warchest

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Benchmark Capital, the Silicon Valley venture firm that scored big after backing San Jose’s eBay, has raised a new fund of $375 million, to be invested in European start-ups. The fund is the second Europe-designated fund, following on from the $500 million raised in May 2000.

It’s noteworthy because, Benchmark has about the best track-record with Internet-related investments, behind only Kleiner Perkins Caufield & Byers and Sequoia Capital. Also significant:

1) Benchmark’s Bob Kagle (investor in eBay) predicted in 2001 that the number of VC firms would halve within the next few years. But the major post-Internet bubble consolidation in the venture capital industry hasn’t happened. Benchmark is just the latest in a string of venture firms to announce new funds. True, Benchmark is a top-tier fund, and so would find raising money easier than most. Still, there’s no sign of abatement; There are even new funds emerging. The VC community is grousing that there’s simply too much money being pumped into the venture industry — which VCs fear will lower returns for everyone. Flip Gianos, of InterWest Partners is just one VC we’ve talked with recently who sees more money flowing into VCs in 2005. Only time will tell.

2) Benchmark is investing in Europe, where economic growth is anemic at best. For some reason, Silicon Valley’s venture firms have been slower to invest in Asian start-ups. True, Asian investment regulations are dicey. But we still find it curious why more U.S. venture funds haven’t moved quicker to set up shop in China, Japan, India and Korea, where economic growth is much higher. We plan to be look deeper into this question going forward.