Early Bets On Local Startups Pay Off With A Record Number Of Midas List Investors In 2022

In the mid-2000s, American-raised newcomer to Europe Reshma Sohoni compared the continent’s tech ecosystem to Silicon Valley and couldn’t believe what she was seeing. “I didn’t understand why Europe wasn’t on the same scale,” she says. “We had the landmass, we had the population, so why wasn’t Europe as productive on the technology side?”

Sohoni (No. 94) is now a newcomer to the Midas list, one of 12 record investors from Europe, Israel and the Middle East to crack forbes‘ Ranking of the world’s top venture capitalists in 2022. For Sohoni, it’s a journey that began after co-founding Seedcamp in 2007 after a year at French business school INSEAD. Originally an accelerator Seedcamp has evolved into a fund making pre-seed and seed investments; Initial reviews at UiPath and Wise, both of which went public in 2021, propel Sohoni into this year’s ranks. (She was already a fixture on Midas List Europe alongside partner Carlos Eduardo Espinal.)

For an outsider, Europe’s tech IPOs in 2021 — not just UiPath and Wise, but also monday.com and Deliveroo — and massive valuations for still-private companies like Swedish fintech Klarna ($45.6 billion valuation) and the German software manufacturer Celonis (11 billion US dollars). review) may seem like sudden excitement. But it has been a long time coming for the European investors who have reaped the supreme rewards.

Sohoni’s newcomer colleagues Avi Eyal (No. 66) from Entrée Capital in Israel and Pawel Chudzinski (No. 92) from Point Nine in Germany also founded their companies around the time of the 2008 financial crisis. but it’s not something that just happened in the last two years,” says Tom Stafford (No. 31) of DST Global, who moved to London from Hong Kong in 2017 to open his firm’s European office. “It’s ten years in the making, maybe even longer.”

Many European Midas investors have settled in London. But one secret of success: Get out of the British capital. “I took a very ‘United States of Europe’ approach,” says Sohoni, who found UiPath in Bucharest. “I didn’t think that Romania would be so different from London or Paris from Copenhagen.”

“If you want to cover Europe, you have to travel quite a bit or zoom in a lot,” says Chudzinski. For years he and partner Christoph Janz have been making investment decisions over Skype as they live in different cities in Germany. This has helped them be more receptive to startups in unusual places, he adds, such as digital health company DocPlanner, which has two headquarters in Barcelona and Warsaw.

Europe’s fragmented market, with a range of nations and languages, has also helped supercharge some startup categories over the long term, others argue. “I think Europe is actually leading in certain areas like fintech,” says Sequoia’s Luciana Lixandru (No. 58). Three of the world’s largest fintech companies alongside Stripe, valued by investors at $95 billion, are currently based in Europe: Stockholm-based Klarna ($45.6 billion), London-based Checkout.com ($40 billion) and London-based Revolut ($33 billion). ). Recent fintech IPOs include Wise, founded by two Estonians, and Amsterdam-based Adyen. “With too many countries, too many payment methods, too many currencies, someone had to make interoperability between all these different national systems,” says Index Ventures partner Jan Hammer (No. 17).

Investors are pointing to Israel’s more mature tech hub as a blueprint that the Nordics and others in Eastern Europe can follow to keep the unicorns going. “15 years ago, Israelis were selling companies for $50 to $100 million because they thought that was all they could do,” says Eyal. More and more entrepreneurs in Israel have come back from experiences in the US or at locally-based multinationals to build, not sell, startups, he says. Eyal’s portfolio company monday.com, for example, has never relocated its headquarters and went public last June.

Veterans of the Midas list like Fredrik Cassel (No. 82), who has been at Creandum in the early stages since 2003, and Philippe Botteri (No. 91), who has invested for Accel in Europe since 2011, say they have more blue- Chip see American companies hovering around the companies they monitor. Sequoia opened its London outpost in 2020, and others like Bessemer Venture Partners, Iconiq, and Insight Partners have since joined.

“Three or four years ago the competition was mostly local European funds,” says Botteri. Now US funds are trying to invest in earlier stages, he notes: “It’s difficult to do business early [in Europe] if you are a California resident.”

That means more competition for Europe’s Midas investors over the next decade than last. It’s a trade-off they’re making for the optimism and perseverance it brings to ecosystem entrepreneurs. “You can now be sure that building in Europe does not entail any disadvantages,” says Hammer.

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