Sep 24, 2020
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The European Venture Capital Industry Is Really Just Making Money For America

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The European venture capitalist has one play in his/her playbook: to find the finest European tech entrepreneur from Helsinki to Madrid and to sell his/her business to a US technology platform company. Twenty-five of these buy up most of the European venture backed startups. Why should you care? Why does this matter? It doesn t if you are only occupied with creating supernovas


If you take a short-term view then once you cash out everyone is happy. Why think too hard about the whoosh of value going to Palo Alto. Palo Alto does two things well. It systematically and consistently creates great companies and it also markets itself very effectively. It tells the area that groovy companies come from Palo Alto even while the macro trend is that groovy entrepreneurs are everywhere


So your average European technology entrepreneur is socialised early to believe they have to get their funding out in Palo Alto. Then their customer acquisition route happens during the Ap Marketplaces which are largely companies whose HQ is in Palo Alto ( Apple Facebook Amazon and Google ). And then finally the Euro VC sells them off to a US tech firm (same as above) based there too


Funding distribution exit. With apologies to Gloria Estefan how do we turn the beat around? If we try to imitate Palo Alto we can always be second rate. You wouldn t tell your daughter who is good at ballet to play football. Life is set identifying your strengths and then playing to them


Silicon Valley is a later born child. They suspect they can perfectly build a new universe. Rip up the old and create a new order. If you listen to the titans a gamble available bitcoin is imminently threatening the pound sterling. The hot new thing always wins. This model is according to raising hundreds of millions of bucks telling a large story to the area and being early


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We’ve a stake in the outcome. Our social welfare state operates differently. We’ve a dearth of risk capital. Our entrepreneurs aren t as good at telling big stories. We recognise that innovation is additive. We didn t stop hearing radio when TV s arrived. We want to enable and extend the existing infrastructure not rip it up


We fundamentally want a sustainable ecosystem: for consumers and employees to both win. I have a strong hunch that enabling and extending is better than disrupting. It maybe a girl thing too. I never got excited about blowing things up as a child but I do like to win. As a venture capitalist however who has a 5% stake in her 50 million fund I’m very interested in the capital efficiency of our investment strategy


I m convinced that the unit economics (which is what all good VCs are interested in) are much stronger in startups which permit and extend the existing infrastructure than in people who disrupt the incumbents. However we never get the chance to do the A/B comparison because Europe is always a couple years behind Silicon Valley


We are in perpetual catch up mode because rather than playing to our strengths we re trying to be Palo Alto to play football when we re good at ballet. This is a recipe for being second rate. Think system level. How corporates innovate is the opposite side of a similar challenge that the Euro VC faces in what to back


Non technology traditional businesses whether banks retailers telcos transportation firms have customers distribution audience and reach. What digital tech startups do is to bring them a way to make money in this digital world. The startup is a digital enabler or a revenue-generating algorithm. By engaging with them non tech traditional business become platforms that’s achieve network effects secure net new revenues and turn their industries into ecosystems


Startups are cars seeking their highway. The entrepreneur starts with a shopper insight and the C is inserted between B to B so that the winning business model of the enabling tech space is B2C2B not B2C and not B2B. We still must be rational about selling our portfolio companies


We ve sold businesses to Google too. However the industry desperately needs to think more system level to reflect at the unique assets of its entrepreneurs and their visions and the context wherein they build their businesses. Every industry faces a digital disruption. The answer is not to build supernovas but to apply digital enablers to build platforms in order to build ecosystems

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