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Time to think big in European VC

Hjalmar WinbladhBy Hjalmar Winbladh on 11 September 2017
Time to think big in European VC

It’s time for European entrepreneurs to think bigger. The venture capital ecosystem is now well developed with expertise and capital for the next wave of tech giants to be born and grow up in Europe. Entrepreneurs just need to unleash their full potential.

European business has never lacked entrepreneurship. However, compared with the US, our start-ups often struggled to access the capital they needed to grow from bright ideas into proven businesses with revenues and profits. The result was that many good companies were forced to sell too early, or move to Silicon Valley to access deeper pools of VC funding. Or they simply ran out of capital and failed.

But no longer. Entrepreneurs can now access both expertise and capital, from angel and seed investment up to later-stage funding for developing businesses. The VC ecosystem is maturing rapidly and will enable Europe to create tech giants to rival those produced anywhere else in the world. To find out more about how Europe’s VC industry is achieving critical mass and creating global leaders, you can read Invest Europe’s report entitled The Acceleration Point: Why Now is the Time for European Venture Capital.

In recent years, the level of seed and early stage funding has grown sharply. In 2016, firms invested €2.5 billion in seed and early-stage investments in Europe, compared with €1.8 billion in 2012, according to Invest Europe data. However, while early rounds of funding grew, later stage VC funding lagged, increasing by a lesser €400 million to €1.8 billion over the same period.

This shortfall is now being addressed with the rise of larger later-stage VC funds. Last year EQT Ventures closed its first ever fund with €566m of investor commitments. Other established VCs are raising bigger funds that can provide increased funding to growing businesses, while providing the liquidity and exit route that early-stage investors need. That means more companies, like digital music service Spotify, will be able to stay independent and in Europe, accessing European talent and diverse and growing European markets.

It’s also not just about the capital - it’s about the support ecosystem. There is now a much stronger community of serial entrepreneurs in Europe - like the EQT Ventures team - who are ready to support and advise the next generation of founders. These serial entrepreneurs have been on the journey before - built products, scaled business and hired teams. They’ve experienced the challenges and made the mistakes associated with building business, so the new wave of founders can learn from them.

So what kinds of companies are we likely to see in Europe? Over the last ten years, the driver has been social and mobile, with successes like gaming groups King and Supercell. Now we are developing great businesses in the fintech space with innovative payments systems like iZettle and Klarna. We are also seeing the rise of machine learning and AI, as well as healthtech. These are areas in which start-ups are finding solutions for making industry more productive and using data to make health services more efficient.

It’s an exciting period for VCs, and a great time to be an entrepreneur in Europe. With increased availability of capital and abundant expertise, entrepreneurs can think big and embrace the possibilities. Please join me at the Venture Capital Forum on 24-25 October in Stockholm where we will be discussing this topic and many more.

Hjalmar Winbladh is Partner and Co-Head of EQT Ventures




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