Road Map to Europe II - Bridging the Documentation Gap Between the US and Europe in Venture Capital Transactions
Tech Companies Alert | June.05.2017
With an increasingly mature tech ecosystem, Europe has never been more attractive to international venture capital and growth equity investors. European Tech had its best ever fundraising year in 2016 with European companies raising €16.2B in venture capital (https://blog.dealroom.co/wp-content/uploads/2017/01/2016-European-Venture-Capital-Report.pdf) and the good times don’t appear to be coming to an end as the volume of deals has continued to grow in the first half of 2017. So, what has changed? Is this a blip or a sign of more great things to come? Here are but a few salient points as to why Europe is the best destination for VC investors in 2017:
1) Emergence of Serial Entrepreneurs - One of the valid criticisms of the European tech ecosystem in the past has been a lack of serial entrepreneurs and a lack of credible mentors for first time founders. That is simply no longer the case – there are many fantastically successful entrepreneurs in Europe who have shunned the proverbial “beach” and continued to stay and build further tech businesses in Europe. There are also a great number of truly terrific incubators and mentorship programs – big shout outs go to Seedcamp, Techstars, Entrepreneurs First, thefamily and Swiftscale.
2) Great Companies – the depth and breadth of the European tech ecosystem today is truly remarkable – it used to be a hard sell to convince a tier 1 VC to come to Europe given that they were just crossing the Atlantic to see one or two companies. That is no longer the case and US investors are alive to that fact – there is a mature ecosystem in Europe now – with founders really understanding the VC industry, how funding works and more and more capital searching out the next Azimo, Deliveroo or Skyscanner.
3) More Investors – 2016 saw more and more $$ helping to seed and grow the ecosystem from the ground up – there is a continued influx of funds at the seed and series A stage in the UK (helped by a tech savvy British government and tax incentives that really work), Berlin and Paris and that has in turn encouraged globally focussed tech investors that opportunities in Europe are vast and exciting – with an increase of new offices in London and further dedicated growth investment funds – Battery Ventures, Speedinvest, Salesforce Ventures, thefamily and many others all opened offices in London in the last year alone!
4) Increasing emergence of BVCA standard form documents – One of the gripes of the Global VC industry about the European tech ecosystem in the past has been the lack of standard form investment documentation akin to the NVCA form in the US. While there are still documentation challenges on the continent, the London/UK ecosystem has now firmly adopted the BVCA standard form document suite which are now viewed as market-standard, allowing investors and entrepreneurs the comfort of quick and relatively painless fundraising rounds.
5) Fintech’s hub really is London – the world’s largest capital market is in London and global innovation in fintech is based here. Chip & Pin cards have still not made the mainstream in the USA…
6) Start Global, Go Local – one of the supposed weaknesses of the European eco system, the lack of a homogenous market, has actually become one of its strengths – it forces founders to think about the global market at an early stage and the variety of and diversity of consumers allows founders to experiment with their MVPs and evolve quickly. The fact that European startups must adapt to survive and be flexible means that European founders don’t often suffer from tunnel vision.
7) Not Silicon Valley – believe it or not but one of the strengths of the European ecosystem is that we aren’t in the bay area – and thus we don’t suffer from an echo chamber environment which can stunt growth and oddly, prevent innovation. Some of the very reasons that gave the Valley its strength such as fresh power, clean thinking and anti-establishment approach are not so obviously present any more while Europe at its exciting more nascent stage of development and with its multiple competing (but increasingly, more collaborative) startup hubs, is clear of such impediments.
In sum, for the reasons noted above, along with a few more, we at Team Orrick see a very rosy future for UK/European tech – the innovation economy is now a mainstay in much of Europe – so much so that we are increasingly seeing more and more Valley based VCs (Boston and NY ones have been here a bit longer) putting their $$ at work in European tech.