Published in partnership with Red Herring's Innovation Pipeline newsletter.

Index Ventures is not a household word in Silicon Valley -- like Kleiner Perkins, Mayfield or Sequoia. But it landed a big fish when it invested $18.8 million in VoIP-provider Skype back in March 2004. Most people had never heard of Skype in 2004. They have now. EBay paid $4 billion for the company in October.

Neil Rimer is cofounder and general partner of Index Ventures. His brothers Richard, Danny and David are also partners at the firm. Before starting Index, in 1996, Neil spent four years with Montgomery Securities in San Francisco. He's invested across a broad range of industries, from enterprise infrastructure to life sciences. He's served on several startup boards, including Stepstone, Flutter, Mediasurface, Ofoto, Genmab and Cellzome. We caught up with Rimer to discuss spinoffs from university research labs.

Innovation Pipeline: Do lab researchers in the U.S. and Europe have different focuses?

Neil Rimer: Here researchers are more focused on problems that lead to big businesses, whereas in Europe research is driven by what is interesting. You find the intellectual motivation less of a concern here than the concern to solve a real-world problem that leads to a viable business.

IP: What other venture firms are investing in spinoffs in Europe?

NR: I think both Highland and Austin Ventures are investing in some of these companies coming out of European universities. Across Europe lots of universities and schools recognize that helping spinout companies and technology is a good way to leverage the work and institution. It is not frowned upon as it was in the past. Many institutions are trying to apply the models of innovation from campuses like Stanford, MIT, Cambridge and EPFL. http://www.epfl.ch/Eindex.html

IP: What's needed to help ensure a spinoff is successful?

NR: You need a critical mass of the right people. It used to be the case that it was a single scientist coming out of a research institute with a good idea. But often the researcher was not willing to throw their life into making it happen.

IP: What else?

NR: You have to have someone who is going to bond with the researcher. But it is rare that both are available.

IP: How do you determine whether you have the right stuff to start a successful venture?

NR: We sit with the teams at embryonic stage and help them write a business plan. We spend time with the researcher and other team members. We look for people who are passionate enough to attract talent and are willing.

IP: Early-stage investment in startups is not as large as in the past. Where does Index see these investments headed?

NR: We are very much interested in early-stage businesses. We are not attracted to raising bigger and bigger funds and doing buyouts. Our most recent fund is a 300-million euro fund.

IP: So you see this as an important area that's not getting a lot of attention?

NR: The key is not how big the fund size is but how big an opportunity it is. We are not ruling things out just because the initial round is $1 million.

IP: What are some of the areas you're investing in?

NR: We are doing nothing in energy and nanotechnology. We feel these areas are too far from commercial relevance and an area where we have no experience.

Innovation Pipeline goes inside campuses and corporate labs to cover technologies on the move from lab to market. The monthly e-newsletter, published in cooperation with Red Herring magazine, features innovations in seven sectors: biomedicine, communications, defense and security, electronics, energy, nanotechnology and software. It profiles a promising startup in each sector and provides analysis of its market opportunity, financing and competitive edge.

For more coverage of technology transfer, read the latest issue of Innovation Pipeline.

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