In our view the VC market is right now undergoing its biggest disruption in history. New players enter with new playbooks. Capital has commoditised. Network becomes key to win deals. Look at multi-stage US VCs opening offices in Europe; new emerging single GP managers such as Harry Stebbings’ 20VC or Max Claussen’s System One; or hedge funds such as Tiger or Coatue who provide fast and “less complex” capital. But at the same time Europe is highly decentralised and not easy to enter for international players: at Visionaries we unite successful digital entrepreneurs, family businesses & industry leaders in a micro VC to complement the world's best VCs. To be honest there has never been a better time for us to be an “entrepreneur in VC” constantly challenging ourselves to continue building the best product for founders.
The main investment hurdle is being a Spanish company. Spain is still a young ecosystem that has not generated yet any €10B+ tech company, which generates some fears for investors about our capacity to create global winners in our country. We are not in one of the top tech hubs with a high concentration of VC-Growth investors, and that put us in disadvantage in the past when we were raising funds against companies that were closer to the cash.
… and I am biased being English myself! After these investments, our interest in Europe has only grown and that's a result of seeing such strong founders emerge who have gone on to build companies like Multiverse, Calm, Vinted, Zapp and Grafana. These are often 2nd or 3rd time founders who have built experienced management teams around them which only increases my optimism for Europe. I would point at companies such as Multiverse where founders like Euan Blair are disrupting the apprenticeship market first in the UK and then in the US and they will very much become a global winner by focusing on Europe first. We have always believed in Europe's ability to create global successes which is also why you see Blockchain.com start in the UK and now be a winner across many countries.
For example, just this year at Ada Ventures we’ve co-invested with impact investors, investors narrowly focused on specific sectors, investors providing a hybrid debt and equity model and investors targeting overlooked founders. This is a really healthy sign and I hope it will lead to less group-think and a wider range of businesses and founders getting funded.
We’re also seeing more-traditional US-headquartered technology companies continue to expand their presence across the region. All of which creates momentum behind venture funding, but it doesn’t influence or change my perspective per se. I focus on the founders, their teams, their vision and mission, and the ability of the product and/or service to transform a market. The fact that most of those companies are in Europe is more a function of my past and my personal and professional network--and being based in Estonia these days means I have my ear closer to the regional ground than before.
Europe’s tech ecosystem is maturing but far from maturity. Every year, I’m continuously impressed by the rising calibre of talent. I also believe the unbundling of equity is here to stay. Companies shouldn’t use expansive equity dollars on initiatives with capped upside - Sales & Marketing spend for example. As the power shifts from a buyers (i.e. investors) to a sellers (i.e. founders) market, we’ll increasingly see companies pushing for a healthier capital structure (including equity, debt and other forms of financing), as is commonplace for public companies.
The rise of alternative financing will help fund more diverse founders, enable the growth of different types of companies and result in a broader variety of problems being solved. Building a company is challenging; making it successful is exceptional. The type of funding that fits your goals, ambitions and entrepreneurship style best is one of the most critical choices a founder must make. Every funding type carries its own opportunities, challenges and expectations. Having options will allow more companies and founders to make their ambitions a reality, resulting in a stronger ecosystem for all.
We are witnessing an increased squeezing of the VC landscape - top tier VCs are increasingly trying to play a role at seed and pre seed and companies like Hopin are skipping traditional funding stages. Valuations are also being highly inflated, and there are other signs we need to watch. In the UK, the impact of Brexit coupled with high inflation and low interest rates is quite a lot to absorb for the industry. We can’t talk about a bubble yet however. Europe is still relatively underserved - France has typically been a difficult market to break into for VCs, but funds like Singular Ventures are now raising huge amounts there. The opportunity in Germany is still huge.