Dear Doctor, Are there any challenges when considering working with VCs in Europe?
Julian Carter says...
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Recently I have come across UK based tech founders raising capital from far-flung places such as New Zealand and China, so raising capital from continental Europe is perfectly reasonable.
If you’re able to raise capital from a European investor then you’re either doing it because you are unable to generate interest from a VC firm closer to home, you have secured more favourable terms or you see a strategic advantage beyond capital, usually around domain expertise, connections, support level or geographic focus.
Of course, you have to satisfy yourself that a VC in a different country has the resources to help you during the journey – for example, do they have enough staff to attend board meetings?
With the boot on the other foot, EC1 Capital currently only invests in UK- or Eire-based tech startups (or founders who are willing to relocate). We are quite unique on this point compared to our peers.
Why do we do this?
Mainly for several reasons:
EC1 Capital is a relatively small fund operating on a lean principle – we invest up to £2m p.a and like to see the majority of our capital being put to work in investments rather than unnecessary overheads. Therefore, we have limited resources to be able to deploy staff into different countries along with the additional support costs (flights, hotels, entertainment) that entails.
Geography. You can’t beat face-to-face meetings.
Commercial Law. Needing to understand the nuances of, for example, German commercial law (even if it might be in English) does not thrill me.
Judgement. As we invest within the early spectrum (seed, bridging, series A participation) we feel it is easier to understand an entrepreneur who works within our own eco-system – usually the founders are all we have to make a judgement call on.
Communication. Being from the UK, we take speaking English for granted and I would never attempt to communicate in my O level French or German! For founders who do not have a clear command of English it can make communication difficult where linguistic nuances can sometimes be lost and further compounded by remote skype calls!
Partnership. We try to help as much as possible and view ourselves as equal partners on the road to success. That is hard to do remotely.
In summary we think it is hard to enough to build a successful company when they are only round the corner from us never mind in Continental Europe.
As EC1 Capital grows we would happily partner on investments with VC’s who are based in Continental Europe, because they will be the lead investor, monitoring and mentoring the investment.
So, in some ways our view could be similar to a founder based here in the UK.
However if you were looking to enter the European market then partnering with a VC in Europe would be a great outcome.