VCs Say EU Firms Can Still Win Big Without US Expansion

The quality of entrepreneurs in Europe has improved over time, and instead of going to work for Goldman Sachs or McKinsey, the new generation of European talent are more likely to start their own businesses to tap into the thriving startup ecosystem, says Thomas Cuvelier, partner at venture capital (VC) firm Alven.

Moreover, there’s an increasing willingness among established entrepreneurs to support younger startups by acting as advisers or angel investors, creating a VC climate that is ripe with opportunity today.

These are all reasons why an early-stage investment strategy is a big win for funds like Alven, Cuvelier told PYMNTS in an interview, adding that primarily focus on pre-seed, seed, and Series A funding rounds is an opportunity to get more involved with a startup’s process right from the onset and minimize risk by investing in promising ventures.

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In terms of talent pools, the U.K. ecosystem has always been a huge FinTech hub, which makes it easy to find talent there, but according to Cuvelier, there is an increasing number of large companies being built in continental Europe, like French neobank Qonto, that are disrupting the traditional banking sector.

He also cited the Baltics, and particularly countries like Estonia — home of money transfer startup TransferWise, one of the most valuable FinTech firms in Europe — as an emerging center with broad expertise around payments and financial services that is budding with FinTech opportunities.

But despite FinTech’s huge growth potential, Alven is not just focused there, Cuvelier noted.

The fund will also be used to further Alven’s exposure to new, promising growth sectors such as blockchain technology, mainly investing in “picks and shovels” — companies like Kaiko, a provider of cryptocurrency market data, that prop up the ecosystem around crypto and blockchain, without necessarily holding or transacting in crypto assets, he explained.

Launched in 2000, the Paris-based fund which has invested in unicorn firms including Qonto, Stripe and Ankorstore, has amassed €2 billion in assets under management over time, and recently announced its sixth-generation fund of €350 million to back European entrepreneurs.

Winning Big Without US Expansion, It’s Possible

For firms operating in Europe, expanding internationally often means launching operations in other close countries in the region, but some VCs have said that is not a winning strategy. Instead, they recommend that startups target the U.S. after winning their domestic market before going back to expand their European footprint.

Learn more: To Win Big, EU Firms Must First Win US, Says Hoxton Ventures Partner

“You really want to get to Google scale or Facebook’s scale if you want to win big, [and] there is no reason for you not to go to the U.S. [And] if you win [there], you win so much bigger than if you go into the U.K. or to France or Germany from one of the smaller countries in Europe,” Hussein Kanji, partner at U.K.-based Hoxton Ventures, told PYMNTS in a previous interview.

Cuvelier said he doesn’t necessarily disagree with that assessment, although he pointed to pan-European unicorns like Qonto and Ankorstore as proof that large scale success is still possible without venturing abroad.

“There is a big market in Europe that still needs to be conquered so [startups] can build very large companies without going to the U.S.”

See also: Ankorstore Unicorn Status Increases Buzz Around France and Europe VC Ecosystems

Nonetheless, while a portion of the Alven VI fund will be deployed across Europe, another portion will be used to support European founders in the U.S., where the firm is looking to leverage its experience scaling FinTechs, marketplaces, enterprise software, social technology and entertainment businesses.

Ultimately, however, Cuvelier stressed that Alven remains focused on supporting entrepreneurs in the European VC ecosystem, particularly in meeting a growing talent need that is key to their growth.

“As we’ve seen during the pandemic and over the past few years, being able to attract and keep that talent is going to be the number one priority for startups.”

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