The European Startup Market
At USV, we’ve been investing in European startups since 2008. Currently 22% of our active portfolio is in Europe. Since 2010, we’ve invested in 47 companies (roughly 8 per year) and 11 of them have been in Europe (roughly 2 per year). So over the past six years, roughly 25% of our investments have been in Europe. In 2015, we have made nine investments to date (a few have not yet been announced) and four of them have been in Europe (45%).
So what’s happening here?
Well first, we have developed an investment presence in Europe. While we don’t have an office in Europe we do have fourteen portfolio companies and every USV partner has at least two European portfolio companies. So we all travel to Europe regularly and we look at new investments when we are over here.
Second, we have developed a number of strong relationships with European venture capital firms. Serving on boards with other VCs is the number one way you build relationships in the VC business and we’ve done a lot of that with European VCs.
Third, European entrepreneurs have, for the most part, abandoned the approach of building domestic businesses in their home markets and are now targeting global customer bases from day one. That means the potential scale of European startups is as large as US startups.
Fourth, there has been a wave of new European VC firms started in the past couple years. Most of these VCs got their start in older legacy VC firms and they are now opening up shop on their own and operating in a more entrepreneurial “silicon valley” style. This reminds me very much of the period ten years ago in the US when USV, Emergence, Foundry, Spark, First Round, and a number of other high quality VC firms opened their doors in the US. This post by a leading venture fund investor in the US talking about the new European VC funds is right on the mark.
Fifth, European entrepreneurs have made money for VCs. There have been 24 billion dollar plus exits in Europe in the last five years.
When you take all of that and combine the fact that there is probably a hundredth of the VC dollars at work in Europe vs the US, you get a great market to invest in.
The Gotham Gal and I are here for the next few weeks of mostly vacation but we will get to see a few of our portfolio companies. Yet another reason to invest in Europe!