Investing In Startups In Europe

One of the big european tech conferences starts today. It’s called DLD and my partner Albert is giving a talk there tomorrow. The last big european tech conference was LeWeb and I gave a talk there. You might wonder why we fly across the pond to attend and talk at these events.

The answer, as Sten Tamkivi explains in TechCrunch, is that europe is a great place to invest in startups. Sten lists five reasons that european startups are exciting:

1) Talent

2) New Models

3) 400 million customers

4) Global skills

5) Security and privacy

I agree with all of those but to me the biggest thing is european entrepreneurs have fully made the change from locally focused to globally focused and are mostly now building businesses that can and do serve a global user base from day one.

At USV, we have made nine investments in europe since 2008 when we started investing there. That is roughly 20% of our total investment activity in those six years. Contrast that with the bay area, where we have made thirteen investments during the same period.

It is way easier to invest in europe from New York City than the Bay Area and that is something we have taken advantage of. And I am not sure that Silicon Valley can or will pay a huge amount of attention to Europe. But that is an opportunity for us. And we are taking advantage of it.

#VC & Technology

Comments (Archived):

  1. Semil Shah

    The 9 vs 13 stat is pretty incredible. And with your blog and investments, I’m sure way more people in Europe feel like they know you and USV (and are accessible) vs other locations. This could be another way in which “venture doesn’t scale.” It doesn’t scale beyond a few partners and some range of assets under management, and it doesn’t seem to scale beyond geography (DFJ network, etc.), and since so many VCs have families and don’t want to be committed to travel for such a long period of time, location advantages — as you point out at the end — are there for the taking.

  2. jkaljundi

    East Coast is also a great location for European startups to have US offices. Much better time zone and shorter flights than Silicon Valley. Much can be done from New York and Boston, so European should always consider these as well. Always compare what fits your goals and needs. You don’t always have to be on the West Coast. So much has changed in the last 5 years.

    1. fredwilson


  3. JimHirshfield

    Interesting observation re NYC easier to invest in Europe. Agreed. And yet Loic and Clavier are Silicon Valley based. Aren’t they investing in Europe? Not trying to disprove anything… Just observation.

    1. fredwilson

      i do not think either of them invest in europe

      1. JimHirshfield

        Forgotten their roots. 😉

  4. Tom Labus

    Do you hedge your European investments for currency?An there’s Paris too!

    1. fredwilson

      no we do not

  5. jkaljundi

    Looking quickly at your portfolio stats, is it true that you tend to to more later stage deals in Europe than in NYC/SF? Seems half of your European investments are Series B, and there’s no seed. Seems logical, that more established companies are easier managed from a distance than an angel/seed deal.And is there any gut feeling on your side if the mix of consumer and B2B/enterprise in your European portfolio might differ from the East/West Coaast portfolio?

    1. fredwilson

      yes, we found that we can’t help seed and series A companies outside of markets where we have deep networks. so we tend to limit our seed and srs A investing to NYC and the bay area

      1. David Semeria

        What if the help these early startups require is *precisely* access to USV’s US network? Obvious example: the startup needs help entering the US market.

        1. JamesHRH

          That’s a B deal.If you are looking for A money and you are from Europe, the answer ‘to expand into NA’ is not the right answer.

          1. James Ferguson @kWIQly


  6. William Mougayar

    It would be interesting to find out the reverse stat: When European startups decide to establish a beachhead in the US, what % does it in New York vs. in Silicon Valley?

    1. awaldstein

      Can you really think of a startup with momentum that doesn’t want a piece of the NA market?

      1. William Mougayar

        Of course they do, but my question was: once they come to the US, what’s the mix of landing in NYC vs. the Valley? My hunch is that NYC is gaining more of the recent ones, but I don’t have the real numbers.

        1. awaldstein

          If you have a product to sell to brands, or a network that requires density of population, why is NY not a mandatory office location is my question? As biased as I might be.I can see both NY and SF. Avoiding NY as a sales office though seems counterintuitive.

          1. jkaljundi

            Question was what if you have to choose just 1 US city.

          2. awaldstein

            First–if it’s sales, NYC.Second, there is almost no reason you have to choose with workshare space. Sales needs to be where their customers are.

        2. Jonathan Marks

          If you look at recent success stories like Shapeways (3d printing) they decided to disrupt inside a vibrant community. That’s difficult in SFO with prices so high – and the community is not typical of anywhere else on the planet.

    2. Matt Zagaja

      I’d be surprised if New York didn’t win. They get the advantage of some overlapping business hours.

      1. jkaljundi

        With SF you actually get two overlapping zones – but these are both late evenings and mornings. Some startups like that, but it’s a real pain to make work in early stage.

        1. CalRobert

          I work for a company based in Dublin, but with offices in SF. Fortunately, the Dubs enjoy coming in around 10 (at least, myself and the engineers seem to) and having meetings at 5 PM (9 AM in SF) isn’t too big a problem.

      2. William Mougayar

        I think it depends of the nature of the startup, and potentially on where their US VCs or customers are.

    3. feargallkenny

      that is changing right now. 10 years ago the default location was Silicon valley mainly due to access to venture funding. These days many Euro startups are starting to see the benefits of being in NYC – lots of major industries being here, overlap in work day, shorter and cheaper flights to HQ and the support of the City of NYC through the NYC EDC. Many of the European govt bodies who support outward investment from their home country are beefing up their staff in digital in NYC (enterprise Ireland and UKTI being a case and point)

      1. jkaljundi

        Curious, how does EDC help startups from Europe?

        1. feargallkenny

          The following programs: world to nyc, international entrepreneurs roundtable and a mentoring program. Those initiatives are global though not just european

    4. jkaljundi

      Quite many make the decision without any analysis. SV is still a stronger brand so many choose it either without being there at all or having been there for just a week or two. Many don’t ever visit NYC and Boston before.Considering Estonian startups, what quickly comes to my head is 2 in Boston (Grabcad, Zeroturnaround), 3 in New York (Erply, Merocrat, Weekdone), 3 in Silicon Valley (Fortumo, Pipedrive, Import2, some I might have forgotten). So it’s around half and half. Almost all of these are B2B. For consumer you might see more in Silicon Valley.

      1. William Mougayar

        True. Some will look at the VC market as a point of reference (SV is more abundant there), while others will look at where their customer markets are (NY has advantages there).

    5. James Ferguson @kWIQly

      I think k it depends on barriers . This depends on model stability clients tech staff etc. If you are ready to get a beachhead often finance is not the key limitation.

  7. Julien

    Isn’t the different legal constraint system a concern/threat/opportunity. We now know that Uber has a tough time in Paris, but at the same time, Net Neutrality in Europe may be stronger than in the US?

    1. fredwilson

      that’s part of #5 – security and privacy

  8. pointsnfigures

    I think Chicago has more going for it than Europe. Also could be more competitive if east and west coast VC’s paid attention and invested here.Ironically, best place in the world to trade foreign currency is London. Time zone advantage. Similar to what you said about NYC and VC investing in EU.

    1. Matt Zagaja

      I often wonder about the merits of people trying to convince SV or NY tech investors to invest in their geographic area versus convincing the money people that are already in their area to invest in tech. In Connecticut we have a wealth surplus (largely Fairfield county money people) and a talent surplus (lots of patents granted to individuals, high percentage of college and grad degree holders) but the tech entrepreneur ecosystem is small. I often wonder if it’s because we don’t have that sense that if your venture fails you can go back and try something new or move on to one of the big cos that employ people here.

    2. fredwilson

      we’ve made one investment in Chicago in the ten years we’ve been doing USV. that was Feedburner. i really enjoyed going to Chicago for board meetings

      1. pointsnfigures

        Investments here right now are more Seed and Series A. In order to find them you need boots on the ground.

    3. LE

      I think Chicago has more going for it than Europe.I would have an easier time investing (which I don’t do) if someone were from Chicago vs. Europe. The reason is I can interpret someone in the Midwest or the US way easier by their voice and tone than a foreigner. (And I grew up in a family where I was around plenty of immigrants I would add.)An example that everyone will understand is that when you run into a “bad person” in the US you can probably know that immediately because of the way they speak and carry themselves. With a foreigner that is much more difficult generally.Likewise it’s easier to read bullshit in a person’s voice (at least to me) if they are speaking my language. This even extends to certain regions of the country as well.This is obviously less of a problem if you’ve done many deals in Europe in the same place and already have the speech patterns down and can interpret them.One of the things I didn’t mention along these lines yesterday re: hearing loss is that I’ve closed many deals just by listening to fine vocal tones in a person’s voice over the phone. I can tell so much from that but it seems not everyone has that skill.

  9. awaldstein

    #1 makes sense big time to me from my own clients in and out of tech.#2-5 doesn’t resonate much with some exceptions. I don’t see this.#6 (not listed) is a real cultural excitement that is really palpable everywhere.And #7 of course, is that is there are very few companies that warrant US VC investments that don’t want the US markets. Investment logic here.

  10. Matt Zagaja

    I wonder what impact the European financial crises had/has on investing there. Also does dealing with the international transactions make acquisition activity less attractive for US firms?

  11. LE

    It is way easier to invest in europe from New York City than the Bay Area and that is something we have taken advantage of. And I am not sure that Silicon Valley can or will pay a huge amount of attention to Europe.Curious what SV does in Asia along those lines vs. US East Coast.

    1. fredwilson

      Nothing in AsiaOur biggest region is east coast

  12. takingpitches

    Fred, a prior time you wrote about this, you talked about half or so of your European-sourced investments ending up re-locating to NYC, That still a trend?

    1. fredwilson


  13. feargallkenny

    It is worth noting that you don’t necessarily have to go to Europe to see a lot of these startups. There are a few places to see them in NYC. They includeThe NYC EDC’s World to NYC program :…VentureoutNY run by Brian Frumberg – monthly events focused on a particular regionThe UK TI digital mission events – Last one was here:…Seedcamp NY Trips –…and, to spot the good ideas coming out of Ireland which is punching above its weight these days in digital, my own Digital Irish series….next one this coming Wed.

    1. feargallkenny

      just saw this pitch session for 10 days from now – European startups with a focus on Sweden –

  14. Guest

    @fredwilson:disqus i know there are no european exits for usv as of yet, but any view on how your european portfolio companies are performing compared with their american counterparts? eg: do you feel you’re taking a bigger risk on european companies even if they’re focused on building a global business.

  15. Richard

    Is Israel part of USV’s european strategy?

  16. BillMcNeely

    what are your plans for the Middle East? @cmschroed could be an interesting addition to the USV team to head this sector up.

  17. jerrycolonna

    I write while sitting in an apartment in Milan. I’ll be doing a talk tomorrow night for a group of Milanese entrepreneurs. I spent last week in Slovenia and Croatia. Tuesday I head to Berlin. I couldn’t agree more, Fred. There’s an incredible energy here.There are distinct challenges of course…some regions grapple more than others with the fear of failure inherent in starting a business. For some folks, the cultural stigmas associated with failure–seemingly especially in those countries where the transition to a market-driven economy from, say, a more socialist economy– is incredibly challenging. And even in countries that have long adopted market-driven approaches, failure can be seen as criminal.But that will change. Especially as more and more entrepreneurs do what they do best: change the world for the better.One theme I’ve been talking about is the fact that the non-native English-speaking world, the world NOT dominated by North America or, even, Western Europe, is far, far larger than the world that’s dominated so much of the internet since you and I were wee lads and had black hair.In fact, that world is almost entirely mobile. In a very few short years, it’s this world–in places such as MENA, for example–that the newest innovations will come. And I can’t wait to see that world. I can’t see wait to see a world where the socio-economic changes match the pace of technologic changes.That world will be bad ass.

    1. awaldstein

      Great comment.On the non tech side, my hobby side of wine, I find that with some exceptions, English as a fluent second language and a commonality of interests on top of cultural diversity is common.I was sitting in a salt marsh natural vineyard in Marsala Sicily a few months ago with bloggers from Sweden, Denmark, S. Africa, Spain, Portugal, France, UK, Austria and Germany, speaking English, talking about Breaking Bad and House of Cards, having a commonality of connection. Yet each of us took back the experiences and wrote about it in language and cultural specifics to our communities.In your words, was truly a bad ass reality.

    2. Kasi Viswanathan Agilandam

      This is what we thought in 1900 ….wait until you find your de-broglie

    3. William Mougayar

      Jerry- To your last point, this is where Bitcoin will be a perfect example. It is currently being adopted more aggressively in less developed countries where their currencies and banking systems are in shambles. In the US & developed countries, the regulators are getting busy, whereas in non-regulated markets, Bitcoin will be thriving. It’s a total reverse of the Internet revolution which was brewed and deployed from the US/Switzerland into the world.

    4. panterosa,

      I see the interesting tipping point between the many ways Europeans are more progressive than we are (learning, lifestyle/health, and embracing new design) and their younger, and/or more progressive types, reaching into the future with both arms, leaving many stuck in a past which erodes ever faster.I just wish unemployment and crappy economies weren’t so in the way of this process – because I know many over there who are really suffering, struggling to keep up basic lifestyle stuff as their economies slide off a cliff. They are hard workers, and need for global minded investors to help them as catalysts solve problems and make cool stuff.And then they’ll make that bad ass world you are dreaming of.

    5. Abdallah Al-Hakim

      Great point and it is one of the reasons why I have talking about startups in MENA focused on the digital Arabia space for at least 3 years now. The fact is that arabic speaking web users make up more than 3% of the internet while Arabic content makes up less than 1%. This gap together with the opportunities for startups in the health, education, e-commerce and other areas to specifically target the arabic speaking market of over 400 million users is an amazing opportunity.

  18. jerrycolonna

    oh, and one more thing, I know I’m biased but I agree that NYC is an ideal place from which American investors can work in Europe (assuming you’re not in Europe itself). There’s a lot to be said for direct flights under ten hours…at least until we get that teleportation thing down.

  19. Alberto Otero

    Congrats for your investment on Hailo. I use it here in Barcelona and it rocks! They even called me to check what I thought about the app. Keep up with the good work.

  20. David Semeria

    The European Union may have 400 million potential customers, but it also has 23 official languages. This makes UGC a huge problem in Europe – it’s almost impossible to port traction from one state to another if UGC is involved.

  21. Dieter Engel

    This is not the industrial age. In the industrial age, you needed to locate near strategic resources. In the information age, money and information can flow instantly anywhere. You can have a board meeting with each board member residing on a different continent! There is no longer any reason to locate an industry in one location.I for one am so tired of the SV focus of the startup cult. Personally, I think that a startup that sets up in SV is one that is probably not worth investing in, because making that choice shows bad judgment. Other than VC what’s the purpose? I know many startups exist solely to sell their own stock to VCs and later to an acquirer and they couldn’t care less about actually making a business. For those “startups” SV is the ideal place.But for everyone else, the costs are too high, the regulatory burden is too high, the employees are too expensive and not loyal enough, and, quite frankly, not that good. (At some point you have to realize that Stanford is not turning out top quality people. Unfortunately, it’s hard to know, unless you’re unusually self aware, when you’re not top quality.)Compare that to locating in the midwest or a “lesser” urban area in the USA: You can hire people from around the country (And better yet, let them work remotely, saving on office space), you can pay them the same thing you would in SV but get a lot more loyalty out of them a lot more dedication and a lot better results. (the graduates from random other universities, say UTA, are not higher than stanford, this is true, but they have a lot lower expectations, and thus more loyalty for a given salary).All your other costs are lower, and rather than dealing with a city government that’s looking to exploit you like SF is, you’re only interactions with the Mayor’s office are likely to be around how grateful they are to have high tech businesses in their city.For startups focused on building a real business, they are, thus, by definition, focused on their costs and their income. IF they can get resources cheaper and higher quality outside SV then they would be stupid to locate in SV. The income fro a global business located in KC vs SF is going to be effectively the same, as the local market is not relevant.Thus startups should locate in KC, or Des Moines, or Austin, or Sulfer, Louisiana, or even better, Leavenworth Washington!

    1. awaldstein

      Not a true blanket statement in my opinion.Sales needs to be where their customers are, network products based on dense urban enthusiasts as well.It’s more true that you can base a company anywhere where you have resources to develop and support, not so with how you sell and market.

    2. Dave Pinsen

      “Other than VC what’s the purpose?”Access to talent. Plus all sorts of allied professionals accustomed to working with startups.

  22. Oo Nwoye - @OoTheNigerian

    Hi Fred,What are your views on investing in Africa? Did you ever get to read this Wired article?

  23. kenberger

    #6 (or probably really #2 or 3): much lower-priced deals now, due to weaker Europe economy in general and lack of US tech bubble equivalent.True?

  24. ESeufert

    I don’t see the necessity of establishing a physical presence in Silicon Valley for most consumer tech start-ups. In general, most early-stage European start-ups seem to rationalize the move to SV (or in NYC, as the case may be) by citing lack of domestic talent, the necessity of a local sales force, or proximity to funding — but I think the real reason that most relocate is that the founders either simply have a personal desire to live in Silicon Valley or are succumbing to pressures from potential investors. I worked at a start-up in Austin, TX that faced the same kind of pressure: relocate to SV or we can’t invest in you. But the best ideas / teams will get funded no matter where they sit.

  25. Kasi Viswanathan Agilandam

    +1 for the “POND” …

  26. jason wright

    what percentage of Americans speak English as their first language?

  27. jason wright

    coding in English helps to bind (or should that be bund?) the Euro tech diaspora together.

  28. Simone Panfilo

    Thanks for this post Fred. Nice to have the lights on the EU startup scene from the other side of the ocean sometimes.I understand some typical concerns like the board meetings pain / commuting time / c-corps vs too many possible company definitions /non US governance in general / agreements details / language barriers (in some cases) / legal issues (eg Uber problems with law around Europe) etcHowever a few general upsides:- cheaper personnel costs (I’d say avg -20/30% for sure)- cheaper mkt competition (think about cpc bidding US compared to – for example – Italy, 70% cheaper thus 70% saving on the mktg costs of the startup)- cheaper premoneys (I’d bet on avg -30/40% compared to the alley/valley)From my direct experience I would also mention the geographical upsides in the product sourcing – leveraging on the local (though globalizable) product/service sourcing – uncoverable by US ones (ex: my startup sells Italian design aiming to leverage on the heritage like eataly did with food or yoox with fashion).This would probably apply to some big consumer industries only (fashion/food/design or luxury in general) but their products demand is huge in US as well.The startup quality in EU has incredibly increased in the last months and is now exceeding the VCs presence. Given that, I am just one among many entrepreneurs that really hope to see more US investors opening to EU investments to raise the general level of experience and capital available.

  29. Abdallah Al-Hakim

    Sten’s article was well written and made great points. However, I do think that smart European entrepreneurs should not necessary be looking at the US as the next stop but consider emerging markets in Asia, Latin America and the MIddle East especially when it makes sense.

  30. James Ferguson @kWIQly

    I sense a greater appetite to bootstrap for longer in EuropeThe overhead of bureaucracy is painful during early traction and cost of capital high.For this reason lighter touch seed culture is attractive and us does that well.

  31. Joel Valdez

    What do you think about investing in Latin America Fred?

  32. Farhan Lalji

    On the talent point, what do you think about the pricing of talent in the bay area versus Europe. I have heard some crazy stories about PMs getting paid crazy amounts in the bay area and this keeping talent away from start ups. Where as talent is a bit more affordable outside of the Bay, allowing startups to (potentially) do more with less. Thoughts?

  33. Liam Boogar

    Great piece Fred.

  34. fredwilson

    Do we include Canada in that cohort?

  35. fredwilson

    if you include toronto and waterloo canada, we have made six investments “between the coasts” in the same period (vs 9 in europe and 13 in bay area) since 2008. it’s 21 in NYC, 13 in bay area, 9 in europe, and six “between the coasts”

  36. Vasudev Ram

    >great points. not just mobile, but non-smartphone mobileI’m not working on the area myself, but in case anyone is interested, I came across this tool, RapidSMS, that looks useful for non-smartphone mobile uses, and is apparently already being used in some successful projects:…(Got to know of it because it is written in Django, hence uses Python, which is one of the areas I work on.)

  37. pointsnfigures

    The midwest isn’t as well developed as the coasts. Companies are far earlier stage, and they also are taking on different opportunities. Two examples would be and B2B dedicated companies that are trying to change paradigms. Need to be on the ground to meet the entrepreneurs and mentor, make intros etc.

  38. jason wright

    …when it started trying to qualify for the FIFA World Cup Finals tournament.Israel in the Asian Football Confederation would have been interesting viewing.

  39. David Semeria

    There are some precedents…