Panel
After the Drought: The Rebirth of European Venture Capital
Milken InstituteStaci Warden, Farooq Abbasi, Hussein Kanji, Daniel Keiper-Knorr, Adrian Lloyd, Erin Platts
- Adrian Lloyd anticipates that building Episode One Ventures' brand and team will span many funds, while the British Business Bank is expected to gradually reduce its support from the first fund to being largely absent by the third fund if performance is strong.
- Daniel Kuiper-Noor predicts that pre-seed and seed valuations will rise from 1.9 million euros in 2011 to a range of 3-4 million euros in the current fund, particularly within fintech and consumer-facing sectors, though deep tech deal flow is expected to remain steady.
- Farouk Abbasi forecasts a 6% growth rate for 2017 venture funding in Europe and expects the M&A landscape to improve as large non-tech corporations like BMW and Mercedes begin acquiring startups for innovation sourcing.
- Hussein Kanji expects regulatory complexity to increase regarding data and automation, driving demand for RegTech and cybersecurity solutions, while anticipating that European companies achieving category-defining status will likely list on US exchanges like the Nasdaq or NYSE.
- Aaron Platts projects that the number of VC rounds in Europe has quadrupled or quintupled over the last five years, creating a competitive environment where scaling rounds of $20-40 million remain difficult to secure.
- A persistent confidence gap between US and European entrepreneurs is identified as a significant hurdle, driven by cultural differences in self-belief that influence fundraising dynamics and company growth trajectories.
- The European VC market is expected to remain fragmented across multiple centers including London, Paris, Germany, and the Nordics, preventing the formation of a single rival hub to Silicon Valley due to the lack of concentration in talent and capital.
- The exit environment in Europe is characterized by a lack of robust public markets and high reporting requirements, causing companies to stay private longer and forcing early-stage entrepreneurs to accept excessive dilution to raise necessary capital.
- Institutional involvement from state funds like the EIF creates a culture of loss aversion that may discourage large bets, whereas the British Business Bank's phased reduction of support is viewed by some as a more productive model for ecosystem maturity.
- Venture investment strategies in Europe are shifting toward a "stock picker" approach, focusing on identifying companies capable of succeeding with minimal VC intervention rather than providing heavy-handed guidance.
- Younger generations in Eastern Europe are increasingly adopting an American entrepreneurial mindset, though there is a risk of this talent bypassing Europe to move directly to San Francisco unless efforts are made to retain them locally.
- The ecosystem requires maturation in founder liquidity, staff incentives, and alumni networks, as enterprise corporates in the UK currently demonstrate lower risk tolerance compared to their US counterparts.
- Future investment focus is predicted to shift from broad sector bets to identifying exceptional management teams capable of building category-defining companies, with the "winner-take-all" trend becoming more pronounced though less extreme than in the US.
- Valuation inflation and market froth are concentrated in fintech and high-scaling consumer businesses, while deep tech projects remain stable and engineering talent in Europe outside the top tier is considered equal to or superior to American peers.
- Farouk Abbasi notes that while EIF averages may appear low, the top quartile or top 10% of funds generates the majority of industry returns, a dynamic where the concentration of power in non-market actors may create a non-market economy.