On the last day at LeWeb there was an U.S. VC roundtable discussion about the state of funding in Europe. We are very much aware of the issues surrounding this subject, so we were curious to see if these VCs had different insights. The panel was composed of Jeff Clavier, Founder & Managing Partner, SoftTech VC, David Hornik, General Partner, August Capital and Benjamin Ling, Investment Partner, Khosla Ventures, moderated by Roxanne Varza, Startup Lead, Microsoft France.
Their take on investments starts with the fact that they’re looking for businesses that can grow exponentially in 3-5 years. Businesses like Snaptchat. Of course, not everyone can be that, but everyone’s on the lookout for the goose with the golden eggs.
Crowdfunding and how it’s altering the ecosystem
The VCs in the discussion said about crowdfunding that it’s a way to validate demand, which is an important aspect, particularly true for devices. Pre-order campaigns are also a good way to validate an MVP. What crowdfunding is doing is feeding the venture model with more data, but it’s not disrupting the VCs. It is affecting the angel investors layer though.
What can actually be disruptive is allowing angels to get together and gather funding. But this is still not obvious enough or consistent enough to make a difference, and the VC model remains intact.
“We’ve trivialized the billion.”
Jeff Clavier, Founder & Managing Partner, SoftTech VC, said about Snapchat’s alleged valuation that it is proof of the trivialization of the billion. And we read about expressions such as “cheap money” more and more often in articles about the Valley. What it will be interesting to watch is how the VC and funding market will balance itself and be balanced by other aspects.
The future for investing in Europe
What the VCs involved in the discussion said and we already know is that the ecosystem in the US is in now way similar the European approach. They easiest way VCs find to reduce friction is to move founders from Europe to the US. But that’s not something all startups want to do, so that is why we strive to grow the ecosystem in Europe, so we can attract investors here, create more jobs, more revenue and improve people’s lives.
The general opinion was that Silicon Valley is still successful because of the many business models available. But big companies in Europe (such as Soundcloud) are setting a path for creating opportunities for more massive investments. And this could also help spark more interest from angel investors and increase this layer of the ecosystem.
One thing is certain: we need heroes and their success stories. We need startups to prove that it can be possible to build a widely successful startup in Europe, that can close consistent funding rounds and which can achieve mass market success. We know it can be done and we’ve seen the first steps, but now it’s time to take it one step farther. And this is what we want to contribute to in the coming decade.