

Investing In Startups In Europe - adunk
http://www.avc.com/a_vc/2014/01/investing-in-startups-in-europe.html

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pea
We have been based and fundraised in SV and LDN and my experiences are the
following:

Hiring: * Engineers in the UK are amazing, and you can hire from mainland
Europe, which is also very good. * Retention rates are higher. * Salaries are
lower. * Most decent start-up-orientated talent is at the under-25 level.
Finding good PMs with big vision is harder, and if you do, encouraging them to
leave for a start-up is less heard of. In a sense, you have to 'grow your
own'. * Engineers traditionally have come from more corporate / tech-
consulting backgrounds than start-up ones; this has both its pluses and its
minuses. * Engineers in mainland Europe, and to a lesser extent London, will
have more experience with older technology (C++, java) than newer
technologies. That said, there are great developers for
clojure/scala/python/ruby, but -- again -- they tend to be at a more junior
level.

Fundraising: * The good people in London are really good, but there are a lot
less of them. * Seed rounds are not significantly harder (due to SEIS and lots
of hnws.) Crunch, I believe, comes at A, B, where there are only a handful of
options (Index, Accel, Balderton, Wellington). This is when people look across
the pond. Ironically, London is full of PE and massive funds (property, hedge
funds, etc.) I assume some of this money will divert to tech in the future. *
For seed rounds, you may have some discount price-wise, but, then again, it is
a lot cheaper to run a company in the UK. I don't believe this discount is
that high or particularly relevant. * Investors are more inclined to want
revenue, and focus on minimizing downside instead of maximizing upside; IMO it
is harder to fund very big, disruptive ideas vs. smaller, cash-generative
ones. There are outliers who are exceptions to this. * Things seem to be
changing. Lots of 'US-style' firms are springing up, but mostly at the seed
level. * There is a tradition of doing seed as equity rounds instead of
convertible debt. This is a massive headache, but people aren't used to debt
like in SV. * Most VCs have been bankers / consultants instead of
entrepreneurs.

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kops
I wonder what european VCs make of the fact that the VCs from US are talking
about european startup scene as a virgin land, ready to be conquered.

So far I see only 3 parties in this discussion 1) US startups 2) European
startups 3) American VCs.

Would be nice to hear the views of the 4th party conspicuously missing from
the discussion.

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toyg
European VCs are few and far between. Despite working in the largest market on
Earth, the overall level of investment is half what you'll find in the States
(if that). Some of that is due to cultural issues, some to economic ones
(wealth is much, much more distributed here, making the average investment
smaller and the average investor more conservative and wary).

I suspect EuroVCs would be absolutely ecstatic if "them Yanks" were to bring
lots of cash to the table while, at the same time, relying on "local
knowledge" to direct that cash.

~~~
kops
> making the average investment smaller and the average investor more
> conservative and wary

X Million dollars are worth the same regardless of the owner (US vs EU). On
the other hand a smaller average investment size should make the deals so much
more lucrative and a turf worth defending.

Edit : on second thoughts it may have more to do with the cultural issues(as
you pointed it out) combined with the regulatory boundaries e.g. amazon.de
can't deliver half the things to Switzerland.

~~~
toyg
_> On the other hand a smaller average investment size should make the deals
so much more lucrative_

No. Small investments -> less startups -> less deals -> less profit. Also
small investments -> small growth -> small deals -> small profit.

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s_dev
I've often thought about why it's easier to get investment in the US compared
to Ireland(EU). I suspect the culprit reasons are:

US VCs are backed with more money and also less risk averse. Developers are
cheaper here.

There probably is an opportunity for US investors to come to Europe to fill
this role.

~~~
tinbad
My experience raising money in Europe are the very low valuations you get from
EU VCs. I've only raised for one company and probably talked to a dozen EU VCs
and eventually got 2 term sheets where the highest valuation was a third from
the deal we eventually got. This tells me that the amount of good/promising
startups is low, hence VCs can invest at lower valuations and because of that
the amount of VCs is low so there's less competition between them. I feel like
its a perpetual downward motion where good ambitious startups and VCs relocate
to other places (US) because of more favorable outcomes. This trend is hard to
turn around and I'd argue that Europe does not need A large VC market as it
culturally does not fit the region. I'd say if you're a EU startup you are not
meant to grow fast and take gambles. Bootstrapping is the way to go.

