European VC ecosystem is on the right way, but still need decisive changes — Speedinvest report
Austrian Speedinvest has published the report based on surveying more than 430 European investors to understand the state of European VC and startup ecosystem. AIN.Capital has chosen the most insightful figures and facts.
The state of European VC
- The average founding year for US firms is 1998, while the most of European VC were founded after 2010.
- The European fund size was, on average, €120 million, some firms raises funds upwards of €500 million. This is still much lower than some of the multi-billion dollar US venture funds.
- Almost 65% of European VC focuses on seed or Series A rounds. This shows that most growth capital is coming from outside of Europe, and that there are not many European growth capital investors leading large Series C to pre-IPO rounds.
- The European VC market is spread out across more than 10 countries. This means that there is not yet one European VC market. For example, San Francisco and its surrounding Silicon Valley dominate on the US VC scene.
- The main reasons for Europe’s market fragmentation are cultural differences, the different maturity of the regions, the regulatory environment, and the language barriers.
- London is the only hub in Europe that comes closest to matching the US, according to European VCs.
The strengths of European VC
According to European investors, there are some fields where European ecosystem is powerful compared to the US:
- Educational system and universities
- Access to great talent
- Technological know-how and IP
A lot of US investors believe that there’s a wealth of interesting European startups to invest in. Also, the public funding environment seems to play to the strengths of the ecosystem. However, many investors mentioned that public money should be more catalytic than it is now. But at the same time, they claim that public money plays an important role in financing research and innovation at universities.
Weaknesses in the European ecosystem
- The poor state of European capital markets and exit environment were recognized as a key risk factor for the ecosystem. Investors also mentioned the absence of an IPO market in Europe.
- Over 60% of respondents said European VC ecosystem looks immature because of the absence of executives with experience in scaling a company.
- More than half of respondents also highlighted that the private LP market is less mature and significantly smaller in Europe compared to the US. It forces the public sector to fill the gap.