As venture capital figures for the third quarter of 2021 have been obtained, one region in particular is gaining relevance: Europe.
While venture capital returns in markets like India, Latin America and the African startup ecosystem have proven impressive, Europe has posted strong results. A series of recent go-to-markets by European startup hubs makes their future impact all the more intriguing.
The new data indicates that the French start-up market is posting record totals in terms of revenue. It has nearly $8 billion invested in French startups over the past two quarters, with the totals roughly split between the two periods. For comparison, that two-quarter figure is billions more than the French startups raised in all of 2020.
As a consequence of this attention to Europe, notable IPOs appear, for example Truecaller Recently.
TechStars It recently announced two new programs on the continent, one in France and one in Sweden, indicating that it sees many possibilities for development in Europe as well.
Faced with this situation, the stock markets are interested in knowing why the global acceleration group TechStars chose those two markets over others, how the group is approaching the cash it offers for shares, whether there are enough startups in Europe for even more accelerators, and whether the geographic area has the follow-on capital it needs to support the pre-seed and other early-stage startups.
Why choose Paris and Stockholm
According to Maëlle Gavet, CEO of TechStars, its Paris accelerator will run two programs per year, while Stockholm will run once in 2022 and twice a year from 2023. This is in addition to programs it already runs in other European cities: London, Amsterdam, Berlin, Oslo and Turin.
Gavet did not try to hide that the Paris program is actually a relaunch: TechStars It had already operated an accelerator in the French capital between 2017 and 2020, although with a different model than the one it finally gave up. And its activities in the city go back even earlier, with Startup Weekends and Startup Week events taking place since 2009, Gavet noted.
In other words, it is not a question of choosing Paris over London for the first time in a post-Brexit context, it only reflects the optimism of TechStars about France. Gavet herself is French, but she has spent most of her career abroad, and the decision to TechStars was based on hard data: French startups raised $5.400 billion in 2020 and the number of French unicorns continues to grow.
Similarly, the bet TechStars by Stockholm was supported by market analysis, including the fact that Stockholm boasts the highest number of tech unicorns per capita in the world after Silicon Valley. Growing venture capital activity in the Nordics was also a factor, Gavet told us.
However, TechStars it's not simply following third-party investment: Despite their rapid growth, both cities are still underserved, Gavet said. TechStars intends to take advantage of this opportunity and not just from an accelerator launch perspective: its goal is to identify where it makes the most sense to make its next batch of pre-seed investments.
Optimism about Europe
When we found out that TechStars was launching more European programs, the question of supplying new startups came to mind. Are there enough to fill more pre-seed accelerators on the continent, or is Europe reaching accelerator saturation point? No, said Gavet, "doesn't even come close" to the overabundance, adding that she considers that "Europe [is] an incredible source of talent«.
Driving that human capital is a combination of factors, including that “Europe has an extremely strong educational environment, incredible infrastructure, governments that support it." he said, which means that the continent has “everything [needed] to make the [startup] ecosystem even more successful«.
Gavet backed up his optimism with numbers. After pointing out that TechStars not yet present in all European national capitals, said that "there's enough room for some of [those] cities to have six, seven, eight, even 10 programs a year", and that "today there are several cities in Europe that [could] easily accommodate between 50 and 100 investments prior to the seed of TechStars every year «.
This helps explain why TechStars recently raised $150 million, which Gavet confirmed to The Exchange is a fund exclusively earmarked for pre-seed investments. It will take a lot of controls to manage that amount of capital, but the throttle collective seems ready to open enough taps to drain the reservoir. (TechStars invests $20,000 in equity capital per startup and offers each an optional earning ability of $100,000 more).
In a recent interview, Gavet talked about the trend for more exposure to European startups. TechStars He stated that it is difficult to pinpoint the precise moment when the feelings changed, but that when he speaks with LP now, “the question of Europe has been much more important» y "the appetite is definitely there now «.
But while most of the news is good, there is no perfect market. And Europe's startup investment space has some not-so-positive aspects worth considering.
Is a Serie A crisis brewing?
TechStars alone will help boost the pre-seed market in Europe. But what about the later stages of the investment? Consider whether the broader business ecosystem in Europe has matured enough to support the number of startups you anticipate or whether it still needs more post-seed capital. According to TechStars he anticipates that the answer will be the latter.
The company could be in a position to play the necessary help to early-stage European start-ups and get them the next checks they need. «When we enter a geography or industry, we bring investorsGavet said,[helping] connect startups with investors«. part of the lens with TechStars in Europe, it ishelp the investment ecosystem grow dramatically", since there are "much more capital than can be invested in Europe«.
But alright TechStars can help close the gaps, it won't be able to do it on its own. That leaves some blank spaces in Europe's startup market that raise question marks for future growth.
Digging deeper into this point, while French startups raised $3.86 billion in Q2021 2021, the second-highest figure ever in the country, second only to Q232 30, the number of rounds dropped sharply from 2021 in the quarter ending June 169, XNUMX to XNUMX in the following three months.
Those figures in any case are great news for unicorns, and indicate that TechStars You should have plenty of opportunities to invest in early-stage startups.
