The Silicon Valley’s role in Narrowing the Funding Gap in Europe

Oct 30, 2013
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Europe is evidently a central topic in the panel discussions evolving at Disrupt Berlin. One of the related recurring subjects is funding and european market. Here’s what some of the speakers at the conferences had to say about that, in particular : Roberto Bonanzinga from Balderton Capital, Sonali de Rycker from Accel Partners, Saul Klein from Index, Dave Mcclure, Ciaran O’Leary from Earlybird Ventures.

The problem posed was the maturity of the European market compared to Silicon Valley and the US in general. What strikes about Europe when looking from the other side of the ocean is it’s fragmentation in different countries, languages, with different levels of connectivity. That being said, Europe highly interests US investors as during the third quarter of 2013, the US venture capital firms invested a total of $7,800 million in 1,005 agreements made across the country. Among them, $3,600 million were allocated to technology startups.

Considering that the first version of the internet was american, it makes sense that the US is a few steps ahead. For a company there still are more options in the US regarding capital financing, venture desk, commercial lending. What’s less developed in Europe than in US is a very sophisticated and competitive environment for capital which is not just equity finance. That’s important for entrepreneurs and investors as well because it doesn’t really makes sense for a startup to use only equity finance to scale. The acqui-hires culture is also a big part of the ecosystem. In this respect Europe has to go beyond funding as startups need capital and options, in order to rapidly form and fail fast which is a strong backbone in the US entrepreneurial culture.

However the situation is changing and a lot of things do happen in Europe. As Roberto Bonanzinga joked about it, “the only thing that makes Europe interesting is a telescope”. Comparing key business metrics companies are doing million dollars revenue. UK is nr 1 in the G20 on internet revenue, 10% of UK’s GDP is being payed by the internet. There is more shopping online in the UK and advertisers spend more money online than they do in the US. Fashion is also strong in Europe with companies like Farfetch, as well as a strong renaissance in hardware. London has become a key tech hub in the region thanks to several reasons like capital, a good welcoming policy and shared language with the US.

But, as Dave Mcclure put it:

Mcclure also announced installing 500 Startups in Berlin some time next year, as he already made 40-50 investments in Europe, but doesn’t actually have an office in Berlin. The Middle East and Turkey as well appear highly interesting to Mcclure. In that eventuality,would that be a good enough reason for the EU to reconsider it’s positions towards Turkey? There is a flowering of great businesses in EU with cities like Stokholm, Helsinki, Paris on the rise. Berlin and London are deeply connected. Also Moscow has been said to be unique, providing the biggest market in Europe. More and more large capital coming from the US are looking to Europe.

The need of educating the markets and help it mature was the conclusion of the debates. I guess this goes 2 ways as US needs a better comprehension of the European environment and business opportunities.