Has Venture Capital finally arrived in Europe?

Now that I'm back in London after 10 years working in the USA, it's fortuitous that my office at Zscaler is a stone's throw away from my Alma Mater, The London School of Economics.

They have regular lectures, and recently I decided to go back to attend one on Venture Capital in Europe. The LSE Finance Department invites me to these from time to time.

There was quite an exciting bunch gathered in the Conference room, including my neighbor, a Consultant at KPMG specializing in due diligence accounting for Venture Capital.

The host of the evening was Ulf Axelson, the Group Professor in Finance and Private Equity at the London School of Economics. LSE has just started a Master's degree program in Private Equity.

Byron Deeter, the managing partner in Bessemer's Menlo Park, California Office, was the most interesting speaker. He focuses on investments in cloud computing, mobile, and internet sectors which is exactly my area of expertise.

Bessemer's 10 Laws of Cloud Computing and SaaS

He was the founding CEO of Trigo Technologies, acquired by IBM. Byron is the co-author of "Bessemer's 10 Laws of Cloud Computing and SaaS", the BVP cloud index, BVP's cloudscape and BVP's next cloud unicorns. He was the principal investor in Criteo, France's most successful IPO of recent years.

Bessemer's Ten laws of Cloud Computing

Felda Hardymon, a senior partner at Bessemer Venture Partners and the Class of 75 Professor of Management Practice at Harvard Business School, was also very interesting. 

His investments have included Parametric Technology, a product cycle-management software provider; sporting-goods chain Sports Authority; office-supply company Staples; and Axis Networks (acquired by ACE), a 4G, wireless-remote radio head supplier.

Also on the panel was Saul Klein, who most recently co-founded Kano and Seedcamp and the co-founder and original CEO of Lovefilm International (acquired by Amazon). He was also part of the original executive team at Skype (acquired by eBay). 

Skype is one of my favorite companies. It enabled me to cheaply and easily stay in touch with friends and family in Europe when I first moved to the USA in 2005.

11% of US businesses are venture-backed companies, which makes up a whopping 21% of the US Economy. So it's apparently crucial to US business. 

This article was referenced at the beginning of the talk. 9% of US Venture-backed companies have IPOs versus only 4% in Europe. While 28% of US companies are bought out versus 20% in Europe.

Some of the theories on why Europe is behind the US in Venture financing include:

1) Venture Capital is a younger business in Europe. It only really got going in 1999, while in the US, it started in the late 1980s. I would have to partially disagree since Sir Ronald Cohen founded VC firm Apax partners in the UK in the early '70s.

2) There is less of a network of VCs and support organizations (Law firms, Consultants, etc.) in Europe than in the US. Part of this problem is caused by employees not moving around enough in Europe. 

In the US, it's far more common to change jobs quickly than in Europe. This change accelerates the size of the networks, which is crucial to building successful tech startups.

3) Financing - in the US, the entrepreneur is the star. Funding plays the second fiddle. In Europe, it's the other way around.

4) Fear of failure - some discussion of the idea that Europeans are more risk-averse than Americans?

5) Regulatory problems - Byron Deeter talked about the difficulties he had trying to set up Criteo in France. Though a French company, Criteo chose to have its IPO in the US on the Nasdaq 

Although the 50 square miles of Silicon Valley creates more companies than the rest of the world put together, this talk did leave me feeling optimistic; now is the time for new companies to take off in Europe.

Share of global venture capital markets by country

As you can see from the chart above, the UK is the dominant recipient of Venture Capital funding for startups in Europe, and Globally, the USA is dominant (50% of the entire global VC funding).

Skype, founded in Denmark (and now owned by Microsoft), is a great template for aspiring European Entrepreneurs.

In the UK, startups are booming. The entire sector has been growing rapidly, well over 10% each year.

• Last year UK startups generated a record $15 Billion in Venture Capital Funding.
• 672,890 startups were founded in the UK in 2018/2019 tax year
• 57.6% of companies that started up in 2013 were gone 5 years later
• 89% of companies founded in 2017 survived the first year
• 65% of UK employees want to start their own business

Below: The European Venture Capital Event at the LSE

Go to my website.

Dinner with the founder of Justgiving

Bela Hatvany was in town, He comes to Boston a lot since He has family and Business interests here as well as some history (although He now lives in the South of France). He's an ancient family friend who has known my parents for almost fifty years. 

I actually went on holiday with his family when I was a child and even lived at his house in Kensington Park Gardens (featured in the film 'Notting Hill') for some time. My parents had just taken him out for dinner in London, so this time, dinner was his treat.

We ate at a Spanish Tapas restaurant where I used to live in Newbury street when I was taking my MBA. Bela's a fascinating guy. His dad lost his fortune in Hungary during the war. So his father came to England & made another fortune as a bridge player, Buyer of art & backer of racehorses. 

His father actually got so good at betting on racehorses, that the betting agencies and bookies began to pay him not to gamble.

Bela told me a great story about when He was at Harvard Business School. He was asked by IBM to complete a data/software project at the end of the first year of his MBA.

IBM told him it would take fourteen software programmers a year to complete. Bela explained that He figured out a way to do it much quicker - He actually completed the project alone, & in only twelve weeks. After that, he was in quite a lot of demand.

Here's one of his other companies, Silverplatter, which He sold to Wolters Kluwer for $113 Million in 2000. These days He invests in a whole host of new companies, such as Justgiving, which he started and which has grown immensely as a business.

I remember clearly Bela telling me about his idea to set up this online giving site back in 2000. I was more than a bit sceptical at the time since the internet was still at quite an embryonic stage plus there had just been a major 'dot.com crash', which took shares in my wife's company, Akamai, from $400 a share to $1 a share.

However, his idea was spot on, and they got the first-mover advantage in the market, so everyone knows the Justgiving brand now. Looking back, I realize that this did teach me a valuable lesson; to be more open-minded about start-up ideas. By the way, Bela also invented the touchscreen back in 1982.

Since then, many of the start-ups or early-stage companies I have worked at have been successful and proliferated.

One of them, Visual IQ, was acquired by a Multinational, Nielsen, for two billion dollars. Another, Zscaler, the cybersecurity company, just had an IPO which now gives the company a Market Cap of $50 Billion. - not bad for two companies that are both just ten years old.

Bela Hatvany recently sold Just Giving for £95 Million. This was a company Bela set up as a project after he had 'retired', to do some good in the world.

Newbury Street, in Boston, USA, where I lived as an MBA student, 2006-2007