Venture Capital – US vs Europe
3 May 2021
2 min read
Venture capital (VC) funds have long been more closely linked with Silicon Valley and the United States than the European cities of London, Paris and Berlin. Analysis by Different of the European VC ecosystem has shown some key differences in the way each continent's VCs operate.
The report's key findings are as follows:
- European VCs grew 1.5x the rate of their compatriots across the pond between 2010 and 2020, although Europe's $24 billion total VC fundraising in 2020 was still less than a third of the $73.6 billion US VCs raised in the same period.
- Unsurprisingly, the Bay Area in California accounts for a high percentage (an estimated 35%) of US VCs while Europe features less concentration. 46% of Europe's VCs are headquartered in 28 European countries which are not the UK, France or Germany, although it should be noted that London on its own is a headquarters for 25% of Europe's VCs.
- European VCs tend to be larger (in terms of number of general partners and number of second international office) and more gender diverse, but 80% of the European VCs analysed are managed by all-white partner teams, compared to 57% in the US.
- The median US VC appears more active than the median European VC, averaging 5.6 new portfolio companies each year vs 3.6 for the median European VC.
- European VCs are more likely to invest across different asset classes and more likely to take a generalist or specialist approach, compared to US VCs who tend to stick to VC and private equity asset classes and follow a thematic approach to investing.
The analysis indicates that there are a number of differences in the way VCs operate in the US vs in Europe. While some of the differences are subtle, some might contribute towards a start-up's preferred fundraising destination alongside some of the often more common decision points (geography, cost of exposure, competition and level of funds available).
As Different sets out in its conclusion to the analysis, understanding the differences between European and US VC transactions is key to developing a successful investment strategy. This will be particularly key for UK-based start-ups as they navigate the change Brexit will have on opportunities on the European continent, vs those from New York to Silicon Valley. Our article on the key differences between UK and US VC transactions can be found here.
Between 2010 and 2020, [European] venture capital fundraising grew 6 fold to nearly $24B. Although still far short of the record $73.6B the US ecosystem raised in 2020, it represents an impressive leap and is about 1.5 times the rate of growth that US fundraising experienced over the same period.