Europe is starting to feel more like Silicon Valley

Europe is starting to feel more like Silicon Valley

We previously highlighted how Silicon Valley’s dominance is increasingly being challenged in innovation centers, with Asia growing faster than the US.  Well Europe is now also catching up in terms of growth stage venture funding, with more optimism in the ecosystem than the US.

According to Go4Venture, a European tech syndication platform for the growth stage, 2016 ended the year on a high note in Europe. The downturn of the first part of the year was followed by a catch up from September onwards. In short, it says, Europe is on a roll – which is all the more surprising when compared to the US where the mood is still very subdued.

In fact, against all expectations and industry comments, Europe is surprisingly continuing to grow by value for funding transactions in the bracket which matters, the €7.5-100 million range. Go4Venture explains this by saying there is better company supply and money supply in Europe than there has ever been:

Company supply:

    • Better clued up first-time entrepreneurs, many serial entrepreneurs
    • More confident and networked seed/Series A investors, putting more money to work to get to relevant milestones
    • Transformed European entrepreneurship culture, with a now widespread understanding of the VC game: they are playing for a meaningful result (or are ready to pack up and move on)

Money supply:

    • There’s a glut of supply at seed/Series A stage, with lots of tax incentives and many new early-stage investors prepared to roll-up their sleeves and travel
    • There’s a Feeding frenzy at the growth equity stage, with many US funds setting up in Europe (most recently Battery Ventures) or private equity funds setting up dedicated vehicles for growth stage investment (like CVC Growth, EQT Ventures, KKR Growth, TPG Growth etc.)

And more of the same is happening, even on a larger scale – for example:

  • Rocket Internet (Berlin, Germany) successfully launched the $1 billion Rocket Internet Capital Partners (RICP) fund. The fund is remarkable by its size (the largest European fund – even if turned towards emerging markets). It is also a remarkable feat from a team who have successfully lost a couple of billion Euros and more since their IPO (€6.2 billion market cap at IPO in Oct 2014 turned into a €3.5 billion market cap as of Jan 31, 2017).
  • Alven Capital (Paris, France) raised Alven V which is a €250 million fund dedicated to early-stage. This marks the success of a team which has been operating since 2000 and has earned its stripes in the company building game.
  • The same goes for Serena Capital (Paris, France) which announced in the last month a €80 million fund dedicated to European big data.

In many ways, Europe is starting to feel more like Silicon Valley. In reality this means that (a small minority of) players are more confident and big enough to play the big Series A game, often starting with big-time (and independently wealthy) past entrepreneurs turned business angels seeding companies, hard-working early-stage funds taking them forward and serial entrepreneurs team credible enough to get the attention of larger investors, including US growth equity funds operating in Europe.

Of course, Europe will never be as intimately networked as Silicon Valley. But Go4Venture says it is trying to re-create a way to connect a disperse community of investors (both geographically and culturally) by allowing them to connect and enable opportunities for co-investment between generalist investors and tech investors, giving the generalists the confidence that specialist tech investors of good repute will manage those particular investments.

To read its full analysis and bulletin, click here.

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