The European Venture Capital Slowdown
The slow economic growth and political turmoil across Europe is taking it’s toll on the European Venture Capital scene. According to research by Pitchbook, total capital invested in European start-ups plunged 27 percent year-on-year to 5.42 billion euros in the first-half of 2016 across 1,279 deals – the smallest amount in terms of euro size since the second half of 2011.
Early-stage start-ups have been greatly affected with only 346 first round financings in the first half of the year, the lowest amount since the second half of 2008. Late-stage European companies are also being affected with only 193 funding rounds for these companies in the six months to the end of June, a 35 percent year-over-year decline.
In the 3rd quarter of 2016 European companies raised €2.1bn from venture capital funds with 464 deals in the 3rd quarter, a 32% fall in the amount raised from the previous quarter, according to data compiled by Dow Jones VentureSource, and 39% lower compared with the same period last year.
UK Venture firms raised only $58.2m in the 3rd quarter, according to Dow Jones, a significant reduction from the $281.5m invested in the 2nd quarter and an even steeper drop compared to the $656.1m in the third quarter of 2015.
In the past few years, NYC has become a thriving hub for technology startups, innovation, venture, and everything surrounding it, making it second only to Silicon Valley in the global startup ecosystem ranking. The impact continues to be seen all over NYC. More and more co-working spaces are opening, strategic initiatives like ‘Cornell Tech’ are gaining momentum and drawing innovators from around the world, and venture funds from Silicon Valley are making regular trips to New York with some opening offices here in search of exciting opportunities. New York is no more just about banking or media. It’s about tech in the most pure connotation of it.
Why European Startups are Flocking to NYC
For European startups looking to grow into the US market, NYC is clearly a natural choice. As venture capitalist Matt Turck shares in his post ‘The NYC Tech Ecosystem: Catching Up to the Hype’ – NYC tech has become an extremely interesting place right now, offering a wide range of benefits and advantages to entrepreneurs looking to build big companies, that extends to global entrepreneurs developing their startups outside of New-York or the US.
So what makes NYC tech so unique for European startups?
- Your Clients Are Here – If you can sell it here, you can sell it everywhere. For startups looking to sell into, partner with, or disrupt Financial Services and Insurance, Media, CPG, Healthcare, Telecom, Fashion, Legal Services and more, New York offers unprecedented access. In addition, a growing list of service providers and investors provide the support infrastructure that young tech companies need to flourish so they don’t have to do it all alone.
- Collaborative Environment – NYC has the level of investors, co-working spaces, and talent startups need to thrive. It is incredible to see how friendly and supportive entrepreneurs are to other entrepreneurs, as everyone understands that success will bring more capital and attention to startups in NYC. In addition, there are regular meetups and events where tech founders gain direct access to investors without long wait time for meetings which are part of the game in other ecosystems.
- Exciting Venture Scene – entrepreneurial activity and VC investment levels have never been higher in NYC, which is by itself a good reason for European startups to get on the plane and establish a presence in NYC. For context, with $1.9B invested, Q1 2016 saw almost 7x more VC investment in NYC than Q1 2012. In addition, there are over 200 active VCs in NYC currently, with about 50% investing at seed and the rest investing anywhere from seed to growth. NYC has never had such an active venture scene and some European startups have already been able to take advantage of this. We’re seeing a growing trend of European countries setting up incubators and co-working spaces for soft landing for their startups.
- Favorable Time Zone – did you ever work with your dev team when you’re 8 or 9 hours away from them based in the Valley? That wasn’t fun right? Well, the proximity of NYC to Europe from a time zone perspective and geographically are making a huge difference for tech startups, as product, sales and tech can work more seamlessly even if they are not physically together.
- Culture Gap – In NYC, everyone is an immigrant. That means that you’ll fit right in culturally, as the feeling around town is of togetherness. Yes, Americans do business differently, but in New York there is a level of acceptance like nowhere else in the world. European tech founders will fit right in, as there is large presence of Israeli, Canadian, South American and even South Asian entrepreneurs looking to conquer the world.
So, are you convinced yet that NYC is the best place to grow your tech startup? If not, you might not be dreaming big enough.
Eyal Bino is the author of this guest post a partner at ICONYC.