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Venture veterans will tell you it takes as much time and money to train an astronaut as a venture investor, and the odds of success are probably comparable. Luck plays an important role.

Six years ago to this month, after working at institutional financial service firms for 5 years (JP Morgan New York and Ares Capital Los Angeles), I decided to leave a comfortable life in the US, follow my intuition, and take a 90% pay cut to move to London and be part of the emerging European technology ecosystem.

Over the last 7 years, I have invested in B2B software businesses across all stages (venture, growth, buyout) in the US and in Europe (in London at Columbia Lake Partners and Dawn). The experiences have provided an unique opportunity to evaluate 800+ companies and work with 14 European B2B software scale ups (of which 3 have exited).

While indeed the feedback cycle in venture is much slower than inside a startup (7–10 years vs. 1–3), I have observed some recurring patterns:

 

  1. European software scale ups need more cross-border collaboration and hands-on support with US expansion
  2. Dark HorsesStallions, and Zebras that create real value receive less attention
  3. Growth capital should be raised when the business has sufficient operating leverage & distribution is measurable and predictable
  4. Market urgency is more important than market size
  5. Not every venture fund provides venture returns, and not every high growth technology startup is suited for venture

I will describe these observations with a bit more detail.

 

1. European software scale ups need more cross-border collaboration and hands-on support with US expansion

 

Silicon Valley is still revered as the (birth)place of innovation and disruption — in spite of the high cost of talent and socioeconomic disparity — due to the intense collaboration and communication that persists in the region. The speed at which key learnings, especially mistakes, are shared in an openly coopetitive and radically candid manner between entrepreneurs, investors, advisers, and the broader ecosystem is incredibly helpful for advancing baseline expertise.

Similar topics come up frequently when speaking with founders here — irrespective of whether the startup is based in Denmark, Sweden, Norway, Finland, Estonia, Netherlands, Belgium or the UK.

 

Time and again it is related to Product Marketing, Sales, Finance and US expansion.

Prior to penetrating the US market, the majority of the 14 Series A/B European software businesses I’ve worked with target customers with an average Annual Contract Value (“ACV”) of $20K to $60K. The reasons I believe this is a ‘sweet spot’ for European B2B software companies scaling to be global industry leaders is because of:

 

  • The distribution of companies by size in Europe and their propensity to spend on outsourced software. There are a lot of mid-sized enterprises (defined as 250 to 2000 FTEs) as Eurostat and this article will show
  • Access to inside sales talent in certain European cities (with strong universities and corporate graduate programs) and US cities (with similar dynamics) to enable high sustainable growth
  • Access to budget for US corporate and mid-sized enterprises that have an urgency to buy outsourced software (i.e. more greenfield with simple decision-making and deployment rather than complex multi-stakeholder, ‘rip and replace’ opportunities)

Why (re)create a playbook that has proven to be (un)successful by a scale up in a neighbouring country targeting the same buyer with the same go-to market strategy?

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