Which US Venture Capital firms are REALLY investing in Europe?

The research below was conducted by Joy Boustani, Guillaume Durao and Jonathan Userovici from Idinvest’s Venture Capital team, using tools such as Crunchbase, Pitchbook and Tracxn.

This last Tuesday was a big day for #FrenchTech and for the Parisian startup community.

Zenly, one of Idinvest’ portfolio companies and a great startup born in the heart of Paris announced a whopping $22.5m Series A round.

https://techcrunch.com/2016/09/26/zenly-raises-225-million-from-benchmark-for-its-location-sharing-app/

That is pretty cool in itself.

But the most exciting part is that this round of financing came from Benchmark Capital (Uber, Dropbox, Instagram, Snapchat, etc.), arguably one of the 5 most prestigious venture capital firms in the world.

Peter Fenton, who was still considered (by CB Insights and the New York Times) as the most successful venture capitalist in the world in March 2016 (and who is currently involved with companies such as Docker, Yelp, Twitter, Zendesk and Elastic) will be joining the board of Zenly.

Top US venture capital firms have obviously some of the most experienced and successful investment professionals. Those venture capitalists are bold, they have significant financial firepower and they don’t let founders discount their dreams as they have already been exposed to building category leaders such as Facebook and Salesforce.

They have deep sector expertise and their personal networks and brands can offer access to a pool of talents, customers and business partners, that is often only available on the other side of the Atlantic.

This is what Zenly is expecting to get from Benchmark.

But let’s be honest: raising a round like this makes you feel pretty unique as well.

After all, how often does Benchmark Capital actually invest in Europe, right?

Well, here is the surprising answer: it’s already the 3rd time this year.

Before backing Zenly, Benchmark had already invested into Citymapper (London, $40m Series B) and Contentful (Berlin, $13m Series B) in 2016.

3 out of their 9 deals of 2016 were done in Europe. In 2015, Benchmark had invested into 8 new companies (+ 16 follow-on investments), none of which was headquartered in Europe.

So is it really happening now? Are US funds finally REALLY getting interested in Europe? And more importantly, which ones are the most active?

As many European founders dream of attracting a US VC and some of our portfolio companies at Idinvest will try to do so very soon, we thought it would be interesting to answer that question.

And without further due, here is the answer!

If you are the founder of an Internet / Software startup headquartered in Europe and you would like to raise money from a US VC, you should reach out to those 10 firms.

The full methodology explaining how we got to that short list is explained below (for those who are interested and/or those who would like to see a few more names of US investors).

A few facts & figures about those VCs:

• You can visit 7 of those firms with a single trip to New York City (only Route 66, Benchmark and Sequoia don’t have an office there).
• In the first 9 months of 2016, those 10 firms have invested into a total of 14 new European Software / Internet startups.
• The average size of the round in which they participated was $21m.
• The biggest round was for Valar Ventures (Kreditech, Germany, $103m)
• The smallest round was for Union Square Ventures (Jobbatical, Estonia, $2m).
• More than half (8) of the 14 startups newly financed by those 10 firms in 2016 are German companies. Berlin is currently their favorite city (5 deals). London is home to only 3 deals. Paris had 1 deal and no Scandinavian startup received funding from any of the 10 most active US venture firms (it's worth noting though that Scandinavian companies such as Tradeshift move their headquarters to the US very quickly and then don't appear here. Same for Belgium-born Showpad that raised one of the most impressive round of the year from Insight Venture Partners but does not appear here).

Here are the 14 deals:

It’s worth noting that so far this year, those 10 funds were actually involved in 27 rounds of financing for European startups. But 13 of those rounds were follow-on investments (and not 1st time investments).

Four of those follow-on rounds were quite large and visible and respectively involved Valar Ventures (Number 26 + Lystable) and Greycroft (Performance Horizon + Azimo). This tends to confirm that Berlin and London are definitely in fashion with US firms and that Greycroft and Valar (probably not that known in Europe) might be the most active US VCs in Europe those days, together with Benchmark Capital and Insight Venture Partners.

Methodology

First step

We started looking for investors that had been investing in at least 4 European startups over the past 2 years, hoping that this would already narrow down the list.

Unfortunately, this query returned an overwhelming number of accelerators. The 4 investors arriving on the top of that list were 500 startups, Techstars, Microsoft Accelerator and SOSV.

This initial list is available here: https://docs.google.com/spreadsheets/d/15Am37xPH7SmX7iJxnjeguuNVIP0HTJn3arSi9z75QOI/edit?usp=sharing

Second step

We decided to focus on US investors which had been financing European startups at the Series A stage (and after: Series B, Series C, etc.). We might have missed a few guys but we consider this extremely unlikely and did a manual check by extending the query above to firms which would have led at least 2 investments in Europe to be sure not to forget any obvious “usual suspect”.

On top of this, we decided to “clean” a bit the list of investors suggested by Pitchbook.

We got rid of all the funds with very little AUM, the super angels and other types of “family offices”, clubs of entrepreneurs and Private Equity firms.

We also decided to focus on funds active in the digital space (Internet and Software) and not those active in Healthcare and Robotics.

The revised list is available here: https://docs.google.com/spreadsheets/d/188vnn8-E9M5p48ghgkmMEpLQF0S3pKcp9TCfxwOoC8A/edit?usp=sharing

It’s important to mention that we also decided to exclude American funds with strong European offices and local staff and Partners.

Accel is an American firm for instance. But they have a London office that is independent, investing with its own team, from its own fund. To raise money from Accel, you can stay in Paris and they visit you or you can travel to London and meet with French or Belgian partners there. It’s very different from raising from a “pure” US firm.

Other US firms with strong, active European offices that we decided to exclude are the following: e.ventures, Google Ventures, Salesforce Ventures, Nokia Growth Partners and Intel Capital.

Third step

After all the above, we ended up with a list of 25 firms.

All those US firms have invested in at least 2 European startups in the last 2 years.

The problem is that except for maybe FirstRound Capital and Greylock (represented now by 83 North in Europe), all of the top US venture capital firms are in there. So that list is not really helpful. And for those which have done 2 deals in 2 years, an average of 1 deal / year can’t be considered a great commitment to the European startup scene.

So we had to dig a bit further and rank all those firms by the number of new investments they had done in Europe in the last 2 years. It looks like this.

Only 13 firms have invested in more than 2 European startups in the last 2 years.

Based on this graph, and also taking into account recent trends (Benchmark has been very active lately while General Catalyst only invested in a giant Deliveroo round - otherwise Yplan is a 2 year old deal for them) and the fact that Blockchain Capital has a very narrow focus, we ended with the legitimate Top 10 presented above.