In recent years, North American Venture Capitalists (VCs), have begun eyeing the European commercial scene with interest. Notable events such as the Spotify IPO announcement have showcased the potential of European start-ups. As a result of Silicon Valley becoming increasingly competitive and expensive, VCs are now looking at Europe as a promising alternative for investment.
Powerhouse investors like OMERS, Lightspeed, and Bessemer Venture Partners have demonstrated their confidence in Europe’s start-up ecosystem with significant capital investments. This shift has led to an increase in cross-border investments, beneficial for both North American investors seeking to diversify their portfolios, and European start-ups in need of funding for growth.
European companies like Klarna, Deliveroo, and Arrival have demonstrated remarkable growth and evolution over the past decade, primarily driven by digital transformation. These companies have integrated disruptive technologies such as Artificial Intelligence, Machine Learning, and Big Data. Fintech’s rise has catalyzed the business sector’s growth, allowing businesses to leverage efficient and secure financial solutions.
However, North American VCs have encountered challenges in the diverse European market. Issues stem from language and currency barriers, unique business practices, and cultural nuances. Additionally, competition within the European market, particularly for early-stage deals, hinges on strategic planning and decision-making.
There also have been tendencies among North American VCs to focus predominantly on London, thereby missing broader opportunities in Europe. This oversaturation in London leads to intense competition and disregards potential deals in other areas.
In the past few years, North American involvement in Europe has seen a downturn, with firms like Coatue exiting and others becoming less active. Despite this, strategic shifts signify a potential change. For instance, General Catalyst partnered with Berlin-based La Famiglia, reflecting a trend towards international collaboration. Such partnerships could pave the way for a more integrated and profitable investment ecosystem.
