In the world of venture-backed startups, some issues are universal, while others depend heavily on the location of the startup and its backers.
He said this in an interview with TechCrunch in London this week: Strictly VC The trip will feature a series of more intimate, investor-focused events, and we sat down with Saul Klein, prominent founder of seed-stage company LocalGlobe, and Raluca Ragab, managing director of growth-stage company Eurazeo, to sit down and discuss how the current US venture market is similar and different compared to Europe.
To be sure, European startups and venture capitalists have had a lot to brag about recently. (The latest Paris-based AI company to announce a significant funding round comes to mind.) The continent also faces obvious challenges, including its proximity to two ongoing wars and a continuing shortage of late-stage capital.
What both markets have in common is a significant lack of exits, which is less than ideal given how much money VCs have been pumping into startups in recent years (money that limited partners want back).
Below is an excerpt from the beginning of Klein and Ragab’s conversation, which has been lightly edited for length. You can also watch the full conversation below. (By the way, our next StrictlyVC event will be on the evening of Tuesday, June 11th in Washington DC, and we’ll be joined by FTC Chair Lina Khan, famed investor Steve Case, and Humane AI co-founder (for the first time) and former OpenAI board member Helen Toner. We hope you’ll join us!)
There’s a lot of exciting things happening locally, especially related to AI. What’s the most exciting thing for you right now?
SK: First of all, thank you for being here. [it’s been] It’s been four or five years since TechCrunch last held an event in London. Welcome back! Here’s what we’re all looking forward to: [from where we’re seated, in the King’s Cross district]I can peek into the dining room Click Research InstituteIt’s the Broad Institute of Europe. If you’re interested in computational biology, it’s literally right there. Go left for about three minutes and you’ll find the world headquarters of DeepMind, Alphabet’s AI business, where you’ll also meet the people who created Alphafold. [the AI program developed by DeepMind].
It’s home to four of the world’s best universities, and it’s also the epicenter of a five-hour train trip away that we call New Palo Alto. [encompassing Paris, Dublin, Brussels, Amsterdam and other entrepreneurial hotspots].
RR: The question comes up again and again: what can Europe offer the U.S.? And I believe we currently have an advantage in three key verticals or areas: security and privacy, sustainability, and deep tech. This comes from the fact that universities have been investing in computer science degrees for a very long time, and that Europe has 1.5 times more STEM graduates than the U.S.
As an American, it’s hard to imagine how close the Israeli-Hamas war and Russia’s war in Ukraine are. [these conflicts] Really [to these hotspots].
SK: It’s good to start with something easy! I started with softball, and now [getting down to business].
From what I’ve read in the reports from California, it’s unclear what the impact will be on business.
SK: We both had great exposure and involvement in the Israeli startup scene, and still do, and Raluca was one of the first investors in the Israeli startup scene. [the autonomous driving company] Mobileye [previously a managing director] Goldman and [Sachs]However, on October 9th [when Hamas attacked Israel]If you look at our portfolio and our exposure to founders in Israel and Israeli founders outside of Israel, in places like Barcelona, New York, London, the number of people working for them is [was] The company has about 90 founders and approximately 5,000 to 6,000 employees.
Amazingly, these companies continue to perform and grow, even though a third of their employees are reservists. Capital continues to flow into Israel, not only from domestic investors, but also from international investors. I think there are 65 cities in Europe and EMEA that have produced unicorns. But there are two cities that have produced over 100 companies: London and Tel Aviv.
RR: From a business perspective, the impact is minimal. The ecosystem is very rich and in fact much more advanced than Europe. They have built global companies that are 10 years ahead of Europe. Where there could be an impact, and where we all need to be careful, is if this conflict spills over into the domestic politics of countries and we get more right-wing or left-wing governments. We are seeing this impact in the Netherlands. Look at what happened in Slovakia. [where a populist with a populist sympathies toward the Kremlin was elected prime minister for the third time in October]So I think we really need to see how this impacts domestic politics. The direct impact of this conflict on business is not that great.
But it doesn’t put a strain on the relationship. In the United States, investors are actually Talk about it.
RR: No, no. In Europe, we can engage in more nuanced conversations.
…than crazy Americans. Well, okay. Another problem that is specific to Europe is the lack of late-stage capital, and this has been a problem for years. One investor called it a case of “missing zeros” in a conversation with the FT last year.
SK: It’s not just that we’re missing a zero. The Bay Area, Silicon Valley, Palo Alto ecosystem is 53 years old, and our ecosystem is probably 20 years old. So we’re at the same stage as the Bay Area. [with regard to early-stage dealmaking] So, we’re moving pretty fast, we’re catching up.
When we get to the Series B and Series C stage, which is $100 million and up rounds, we [funding just a quarter] Compared to the Bay Area, these deals are dismal. If you look at just the UK, there’s a $35 billion difference between the Bay Area and the UK. We’re basically where the Bay Area was in 2014. On the policy side, there’s a lot of activity from the UK and the French government in Brussels. [focused on] But ultimately, policies cannot solve the problem. [regional] Companies that people can invest in.
But you’ve avoided a lot of crises, and when you think about all the money that some of the companies wasted on those $100 million investment rounds, maybe it’s not so terrible.
SK: What Silicon Valley really understands, and we don’t yet, is that a lot of the capital that you put in at a later stage can be sort of written off. [because] Ultimately, if you can scale and create a compounding effect, you can make 20,000 times your profits in the stock market. So I think there’s still a lot we can learn from the Bay Area.
RR: I think there is something to be said about what you said, because we [capital] To effectively close the gap, European companies need to get leaner. As a result, I think European markets are less volatile. They’re not as overpriced or overheated on the upside and they’re more symmetrical on the downside. In fact, when you think about risk vs. reward, it’s actually a better market because you’re not getting into a massive oversupply of capital.
See below for details.
Source link
