Venture Capital/Analysis/

The data: European vs US VCs

Longer fundraising cycles, fewer emerging managers and more CVCs: the European venture scene doesn’t look like that in the US.

By Isabella Pojuner and Freya Pratty

Venture capital funding in Europe grew 6x over the last decade, to nearly $24bn in 2020 ($34.3bn in 2019). This is still short of the record $73.6bn the US ecosystem raised in 2020, but a big jump and 1.5 times the rate of growth than the US over the same period.

US investors and funds have expressed an increased interest in Europe in recent years, most recently with Sequoia launching a London office. Europe remains a cheaper place to invest and is churning out some impressive startups.

European startups are also increasingly delaying their expansion into the US — instead focusing on growing their European presence and taking advantage of all the capital sloshing around the continent at the moment.

A new comparative study by Different Funds, which looked at 600 investment firms across 74 regions in Europe and the US, has found European funds are more international, more diversified in funding and more generalist — with some interesting insights into the makeup of partners, too.

Here are the report’s key findings.

Is London the new Bay Area?

Not quite — but it does remain firmly at the centre of VC in Europe. 28% of European firms are UK-based, with a whopping 25% in London.

Germany and France make second and third place, with 13% and 12% of funds respectively — but the remaining 46% of funds are distributed across 28 European nations.

On the flipside, 35% of US funds are headquartered in the San Francisco Bay Area — so Europe’s VCs are by comparison fairly spread out.

Europe’s also way more international

European funds are twice as likely as US funds to have a second office — and mostly outside of their HQ country. 38% of European VCs have a second office.

In contrast, perhaps because the US is so darn big, only 29% of US VCs with second offices have an international presence in comparison to 90% of European VCs with a second office. 51% of these are outside Europe.

Around 16% of European firms have a US presence.

Debates around how Brexit will affect the UK’s stronghold on VC are ongoing. There’s been a decrease in funding for UK VC firms from European LPs since the 2016 vote, while funding from US LPs is on the increase. Startup-friendly regulations, however, are attracting companies to smaller countries like Latvia and Lithuania — which could in turn decentralise VC funding.

US investment teams are smaller and more male-centric, but more racially diverse

One-quarter of US funds have solo general partners, which is very uncommon in Europe, where less than 10% of firms are run by solo GPs.

On average, US funds are slightly smaller, with three general partners, whereas European funds have over four. 

“Though impossible to say for certain, perhaps this is reflective of America’s world-class proclivity for individualism.” says Jacob Tasto from Different Funds.

What do they look like otherwise?

In terms of the representation of women, 16-17% of general partners are women in both the US and Europe. Men really do still dominate VC — all-male teams make up 59% of European funds and 67% of US funds.

It’s just as bad when it comes to all-white teams; in Europe, 80% of firms are managed by all-white partner teams.

(Here’s a more detailed picture of diversity — or a lack thereof — in UK VC.)

Europe VCs have got more fingers in more pies

Alternative funding structures are far more common in Europe, making up 30% of firm count — compared to just 13.5% in the US.

Europe seems much more interested in corporate venture capital, with 14% of VC firms falling into this bracket. There are also more evergreen funds over here (3.9%).

European VCs take longer to fundraise

US firms tend to raise a new fund — on average — every 3.2 years, compared to 4.4 years in Europe.

They also invest at a faster pace, adding 5.6 companies to their portfolios on average each year, compared to 3.6 companies for European VCs.

Europe’s more generalist — but also hotter on sustainability

Finally, Europe’s funds tend to be less thematic and more generalist. That’s no surprise: the rise of specialist and thematic funds is often seen as a sign of the maturity of a VC ecosystem. 

Europe is starting to see more thematic funds launch, however. A whole host of climate and impact tech VC firms have set up in recent years, like Pale Blue Dot, Revent and 2050. The continent also has several new healthtech-focused funds, like Heal Capital and Crista Galli Ventures. And a growing crop of funds focused on specific kinds of founders — including underrepresented founders, Gen Z founders and student founders

This reflects investment trends: the report also found that European investors are more likely to invest in climate tech and sustainability-focused companies, as well as travel, fashion and digital health.

View the original report here, alongside Different Funds’ VC fund database — which now expands to European funds. 

The original version of this article said that the amount of money in US venture capital had grown 1.5x over the past decade. In fact, the rate of growth in Europe was 1.5x faster than in the US. We also wrongly said that publicly traded VC firms did not exist in the US.

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Dr Keith Arundale, Henley Business School, UK
Dr Keith Arundale, Henley Business School, UK

Thank you for these interesting findings. In 2013 and 2014 I interviewed 64 separate VC firms in Europe and USA and 40 other stakeholders to investigate differences in the structural, operational and wider environmental characteristics between European and US VCs. My findings were published in 2018 and 2019. In my sample US VC funds (average size $282m) were considerably larger than UK ($168m) and continental European ($128m) funds. US firms had around one more investment partner in total than UK and continental European firms (in contrast to your data) and proportionately more partners with operational and entrepreneurial backgrounds. US VCs… Read more »