eqtventures

European entrepreneurs - it’s time to think bigger!

Hjalmar Winbladh

It’s time for European entrepreneurs to think bigger. Huge, in fact, and start building winning global businesses. The venture capital ecosystem is now well developed with both the expertise and capital needed for the next wave of tech giants to be born and then grow up in Europe. Entrepreneurs just need to unleash their full potential and resist the urge to sell before they’ve built a global success story.

European business has never lacked entrepreneurship. Europe is a hotbed of exceptional talent and bold innovation across numerous diverse industries. However, compared with the US, our start-ups have often struggled to access the capital they needed to grow from bright ideas into proven businesses with revenues and profits. The result is that many good companies have been 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.

The fact that many great entrepreneurs have moved to the US has also had a broader impact on the ecosystem that’s so essential to a start-up’s success. With European founders often remaining in the US, there has been a brain drain across the Atlantic and the new wave of European startups haven’t had access to the knowledge and mentorship required from successful second and third time founders. This mentorship is a vital factor in a company’s success that is often overlooked. It’s not all about the capital but also having access to the support ecosystem required to learn and grow.

But both factors are no longer issues. Entrepreneurs can now access all stages of 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. 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.

Regarding access to support and mentorship, there’s 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 startup journey before - built products, scaled business and hired teams. They’ve experienced the challenges and made the mistakes associated with building business, so that 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.

A version of this post was originally published on Invest Europe.eu