While the US continues to flourish as the epicentre of venture capital, Europe is in an ongoing battle for funding for its emerging tech companies. “Capital is being put behind a start-up much more quickly in the US, with the approach of: we’re just going to try and see if it succeeds,” says Robbin Hoogstraten, Benelux regional manager of European co-investment platform SeedBlink.
- In Europe, investors value more what start-ups have already achieved, while in the US the focus is on pursuing dreams and new opportunities.
- To improve the investment climate in Europe, a change of mindset is needed.
Chips, advanced AI solutions, data centres: Europe needs tech start-ups more than ever before. But despite the growing demand for technology, there still seems to be a huge funding gap between start-ups in Europe and the US. Taking artificial intelligence and machine learning as examples, venture capital firms invested around €38 billion in US start-ups last year, while European companies managed to bring in just €10 billion, according to data from PitchBook.
A shame, thinks Hoogstraten. “Tech start-ups in Europe are packed with great ideas, but it’s just harder for them to realise them.” With his investment platform, he is trying to change that. The platform attracts local investors interested in early-stage European tech startups. Since 2020, Seedblink has invested more than €200 million in European tech startups.
There are several reasons why Europe’s investment climate is lagging behind. You often see that in the US, partly because of the similar rules, culture and unified language, it is easier for a start-up to gain momentum, Hoogstraten explains. “Unlike here, where all things tend to be a bit more gradual.” So, a US start-up can move to other states relatively easily once the formula or business model is right, whereas European start-ups, such as a Dutch one, often expand first to, say, Germany, then to France, and only much later to the UK.
In addition, then, another trend is clearly visible. “Capital is put behind a start-up much faster in the US, with the approach of: We’re just going to try if it succeeds.” In short: Europe often lacks the attitude of risk appetite among many investors.
The vision of a European tech start-up
That European investors are reluctant also strikes Dutch entrepreneur Lemar Bachtiar. He is the co-founder of Authic: a platform affiliated with Seedblink – that builds NFT marketplaces to launch digital collectibles, among other things. “We find that European investors are generally a lot more cautious. They place much more value on already demonstrated traction, such as the number of customers you have already connected. In America, on the other hand, it’s more about the dream. About what can happen in the future.”
And that doesn’t make raising funding in Europe any easier. Indeed, “We have plans to expand our next round of funding to the US. Our growth continues and we now have decent traction in terms of the number of new customers. Raising capital and opening a branch in the US as well will help us realise our ambitions even faster.”
Despite the areas for improvement, Europe has not completely lost its charm, Bachtiar wants to add. “For example, I also notice that European investors take more time for personal interaction with start-ups compared to US investors. Nurturing the small scale and creating time for each other are essential. I wouldn’t want to miss that.”
There is no single solution to the problems surrounding the investment climate in Europe. It is time for an overall change of mindset, thinks Hoogstraten. Fortunately, this seems to be cautiously coming about. “Per country, you see more and more financial initiatives coming up. Think, for example, of funds being set up specifically for tech start-ups. I also see European countries increasingly seeking rapprochement. Large cross-border festivals are being organised, think of VivaTech in Paris or TNW Conference in Amsterdam. These attract the entire ecosystem. Very valuable connections often arise there on a human level beyond just the things that can be found online. This stimulates and facilitates an investment.”
In addition, Seedblink can also further advance Europe, Hoogstraten is convinced. “I am proud that we ensure that investors look across borders. When we put a Dutch start-up on our platform, sometimes German, Romanian and Greek investors suddenly come on board. This not only raises capital, but also opens the door to a wider European network.”
Bachtiar also hopes that the situation in Europe will continue to improve in the coming years. “It is really important to keep investing enough in the young companies if we want to create enough jobs here in Europe and be leaders in the tech world. Then, above all, let us work together to ensure that start-ups do not leave for Silicon Valley in large numbers.”