Expat Essentials

Show me the money (Pt. 1): Dispatches’ 2020 list of Europe’s venture capital firms, private equity and early stage investors

(Editor’s note: Dispatches Europe tracks the tech scene and capital trends in Europe because so many of our highly skilled internationals are engineers, physicists and developers who aspire to be part of the new new thing. This post, part of our Tuesday Tech series, is the first of two tracking risk capital in Europe.)

What we experience constantly as we work with startup teams is, the talented engineers and physicists we meet in European innovation centers know everything about the science, but not nearly as much about capital.

In the United States, we grow up worshiping entrepreneurs. We know Mike Markkula pulled up in front of Steve Jobs’ house in a Corvette and agreed to invest $350,000 when Apple Computer was still in the Jobs’s Los Altos garage.

We know the difference between convertible debt and senior-secured debt, between VCs and private equity; a term sheet and an NDA. The dynamics of capital and the startup culture are just part of our DNA.

(See Dispatches’ handy guide to risk-capital and investment terms here.)

Though this is changing rapidly, in Europe – prestige-wise – being an entrepreneur has been way down the ladder from even a mid-level VP at French, German or Dutch companies. So, when it comes to early-stage risk capital, Europe has lagged (badly) behind the U.S. until recently, when large European investment firms such as Index Ventures and Atomico started raising hundreds of millions and even billions in funds.

Nature abhors a vacuum and now American and Chinese VCs and private equity firms are arriving and investing. But increasingly, Europeans are loathe to take investment from the more aggressive Americans and Chinese. The reality is, there are simply too few significant European-based VCs outside of London and Dublin.

This year is unique in that U.S.-based and China-based VCs are in a race to find worthy tech startups simply because they can outbid the locals in deals, with a buck’s worth of equity in a European startup in a Series A funding round costing $1.60 in the U.S., according to Atomico’s 2019 State of European Tech report.

That’s a discount too good to pass up. Trust us – Americans love a bargain.

Now, how to get their attention …

At this level, it’s not easy, though you can pitch INKEF and Creandum through their websites. But where incubators, accelerators and venture builders beg you to apply, getting in the boardroom at, say, Hedosophia is tough. In fact, the path to a VC or private equity firm is often through the contacts of your early investors and your accelerator. Though if you’ve got tech magic, the VCs and PE folks will find you … and throw money at you, which can be a bad thing. But that’s a story for another time.

Major American and Chinese firms

Accel

Accel, based in Palo Alto, has had an office in London for more than 20 years and pretty much had Europe to itself. As a result, it’s had a number of successes including Blablacar, Deliveroo and Spotify.

Accel closed a $575 million fund late last year, capital set aside for Europe and Israel. The major knock on them is that they’re tough to approach.

Accel invests at multiple stages including seed, as well as in early-stage startups and scale-ups.

Balderton Capital

Balderton started out the European operations of Sand Hill Road stalwart Benchmark. Now it’s an independent VC based in London. Is this a British firm or American? We listed it under the U.S. firms just because of its roots and because it has more in common with Accel, which also started in The Valley.

Balderton both makes direct investments in early-stage companies (usually A rounds) and it buys the equity stakes of early investors who want to cash out of fast-growing tech scale-ups.

Balderton has raised $2.7 billion in total since 2000.

B Capital Group

In 2018, Eduardo Saverin and Raj Ganguly showed up here in Eindhoven, our HQ, on High Tech Campus Eindhoven unannounced. If you don’t know who Saverin and Ganguly are, then go look them up real fast. We”ll give you a minute …

Okay, where were we? Oh, yeah, Saverin and Ganguly are out in the world, making investments in Mexico, Singapore and, yes, Europe. B Capital recently raised a second 10-year fund of more than $800 million. Though it’s not a B Capital deal, Saverin just backed Antler, the Singapore-based early-stage fund/venture builder, which has offices in Amsterdam and across the globe.

So connect the dots … and expect B Capital – based in LA and Singapore – to make news sooner rather than later.

Tencent

To get an idea of WeChat owner Tencent’s leverage in the startup world, it’s the world’s sec­ond largest in­vestor in tech uni­corns af­ter Menlo Park-based Se­quoia Cap­i­tal. The Shenzhen-based conglomerate has invested across Europe including in Paris-based game company Voodoo.

Late last year, Tencent announced it would invest $10 billion in Europe, about a third of that in Germany.

So far in 2020, Tencent has made at least five investments in Europe, including two in fintech, one in digital media, one in marketplaces and one in the software space. In June, Tencent acquired about 80 percent of Czech Republic–based video game developer Bohemia Interactive for $260 million, according to media reports.

Fun facts:

Tencent has invested in more than 800 companies, at least 160 of which are Unicorns. Since it bought Finnish gaming company Supercell, Tencent is by far the world’s biggest mobile game company.

Kleiner Perkins’ investments from its 18th fund by stage and sector

Kleiner Perkins

This is the original Sand Hill Road VC where giants such as John Doerr changed the world with investments in Amazon and Google.

Last month, Kleiner Perkins has joined a number of syndicated deals including a $100 million round in Berlin-based digital travel reference Omio, which started as GoEuro.

Required reading to really understand Kleiner and the VC world: “The New New Thing,” by Michael Lewis.

Major European firms

EQT AB

This publicly traded Stockholm-based PE/buyout firm has about 41 billion euros to invest and invest it does. Unlike VC firms, private equity firms and buyout firms acquire companies either to hold, to pimp them out and take them public or to sell them. So if you’re starting out today, you goal should be either to sell out to these guys or to bring them in on the way to an IPO.

EQT has raised more than 62 billion euros in capital since its inception and currently has about 41 billion in assets under management across 19 active funds within three business segments: private capital, real assets and credit, according to its financial filings.

The firm is famous for investing across sectors including health care and consumer-facing companies as well as across borders.

This is the whole website ….

Hedosophia

Based in London, Hedosophia is a major investor in European fintech, though unlike most American VCs, it flies so far under the radar we can’t quite figure out how they maintain deal flow. But they do, typically coming in at the B round, investing between $10 million and $30 million, according to this amazingly detailed post on Sifted. So, we’re guessing they have a “don’t call us; we’ll call you” policy.

The Hedosophia website is just a landing page, though the founder, Ian Osborne, is already a legend at 37 years old.

According to the media reports we found, Hedosophia has about $1 billion under management including backing from Michael Bloomberg, the American media mogul who’s worth an estimated $55 billion.

Hedosophia holds a significant piece of N26, the Berlin-based digital-only bank that’s been struggling as of late with internal management issues. The firm also holds stakes in online money transfer firm TransferWise, based in London, and Raisin, a startup neobank based in Berlin.

INKEF

Founded and backed by a giant Dutch pension fund, INKEF Capital, based in Amsterdam, has 500 million euros under management. INKEF is an early-stage investor in red hot AI medical startup Castor. They’ve had two major exits with 3D giant Shapeways, now based in New York, and Sapiens, which was sold to Medtronic for $200 million back in 2014.

Unlike most VCs, you can email INKEF at this address.

Creandum

Guernsey-based Creandum, which started out as Swedish, making its bones investing in Spotify and iZettle. The tech-focused VC just closed Creandum V, a $300 million early-stage fund. Creandum just expanded its Berlin offices with other offices in Stockholm and San Francisco.

And like INKEF, you can ping them here with your idea.


Tune in next time when we’ll tell you about Atomico, Index Ventures and more of the American and Chinese investment firms where money is burning a hole in their pockets.

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