The potential in European venture capital

My partner Simon Cook recently gave this data-packed presentation to a European Venture Capital Association (EVCA) conference.  It does a great job of comparing the US and European venture capital industries and makes the case that Europe has all the fundamentals in place for a great decade going forward.  The most important of these are a strong base of innovation, low supply of venture capital (normalised for GDP), an increasing number of serial entrepreneurs, an increasing number of experienced funds and VCs, more capital efficient companies, and a growing number of successful exits.

There is, of course, a long way to go and this is no time for complacency, and for one thing we still don’t have enough large indigenous tech companies here, as I wrote yesterday.  That said I feel confident the next ten years will be the time when European venture capital finally comes of age, and that is good news as much for the startups that take investment as for the funds themselves.

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  • Thanks for posting that Nic, it's full of useful information.

    For what it's worth, I think the main difference between European and (West Coast) VC is the latter can be more open to funding pre-traction ideas. This could be a function of their larger fund sizes, but it I think it may also reflect a more qualitative approach to investing.

    As a consequence, Europe has an (arguably justifiable) reputation for spawning quite a few “me too” ideas over game-changers….

  • Thanks David. I'm not sure I agree with your distinction though – in the web space not many of the game changing companies in the US took venture before they had traction. Think Google, Facebook, Twitter.

  • I suspected you wouldn't agree 🙂

    They do so say everything in the US is bigger (I'm reminded of the famous story of IKEA being confused in the early days over why they were selling very few drinking glasses but loads of flower vases…)

    I imagine this principle extends to angel rounds too….

  • I think angel rounds are probably where it is much easier to get capital behind a pre-traction idea in the US.

  • RichardForster

    That is so true, particularly in the current climate.

    I wonder if forward thinking European VC's should be stepping up to the plate to fill the gap, particularly if they are serious about trying to get European entrepreneurs anywhere near a level playing field with the US. Although they probably feel that's beyond their remit.

    I'm looking to the US at the moment, we've developed a customer care application for the retail/consumer market and have had interest from a US retailer over here in the UK, which makes me think the US would be a better place all round to start up in.

  • As a generalisation VCs in Europe are focused on making their core model work and growing their funds.

  • RichardForster

    Which is completely understandable, Nic

    However its seems to me that the problem remains that for web start ups where you might need say £100k-£300k initially and angel funding is the traditional route for that there is either insufficient quantity of that funding or the access to that funding is more difficult to find/highly guarded (by the network facilitators) than in the US.

    I know quantity doesn't necessarily mean quality however until we do more to encourage entrepreneurs with both finance and infrastructure we will never get those thriving entrepreneurial cultures that exist in the US. Which is ultimately to the detriment of the European VC community because there will be fewer great deals coming through in the pipeline.

    I think if Europe wants to compete with the US then entrepreneurs in Europe need better access to early stage (angel level) finance.

  • I agree with your logic, but I'm struggling to reconcile it with the high level data which shows a higher volume of small investment in Europe than the US, relative to larger investment.

    I think maybe the cash is there, but it is being deployed in the wrong places. I think there might also be a shortage of people in Europe skilled in working at that level with high beta startups.

  • I liked this article.