Just as with its current fund, Index is especially targeting social media and cloud computing startups, making a few sub-£1 million seed round per year plus early-stage investments of up to £15 million, Holmes said: “We’re still keen to do social media investments - it’s a great business model if you can get it working.”  In the last year, Index has funded companies including genealogy site MyHeritage, social gamer Playfish, cloud storage engine RightScale and video chat site WooMe. Homes’ companies include pan-Europe social net Netlog and virtual wardrobe dresser Stardoll.

Holmes said European entrepreneurs can be more original than those in the US: “In the Valley, whenever one idea is launched, you’ll often find four, five or six very similar ideas starting up and getting VC funding. In Europe, typically the founders are not necessarily looking to what everyone else is doing when they start their companies. Sometimes you get more radical, innovative and wacky ideas coming out of Europe, whereas in the US entrepreneurs are not quite as original.”

He said capital-intensive startups and those which have “very few proof points” will find it harder to raise money, so companies will need to have “clever ways to grow with more constrained capital” and less marketing expenditure. Holmes said the banking crisis hadn’t hurt Index’s ability to raise money from its backers: “They still see that you can make good returns by backing risky, early-stage ventures. Many of the other asset funds that they might have looked at investing in - private equity, hedge funds - they’re more challenged in this environment than venture is; there’s large amounts of of leverage to do those deals, which is hard to come by now.”