Backing Europe’s hidden champions: why the VC industry must embrace a more collaborative approach
The European startup scene is brimming with untapped potential, from the tech hubs of Berlin and Paris to the emerging hotspots in Central and Eastern Europe. Backing our homegrown champions is crucial for ensuring our continent remains competitive on a global scale. However, we risk missing out on promising investment opportunities due to the fragmentation of the VC industry.
The question of what truly foretells a startup's success has been the subject for heated debates among VCs for a while. One just needs to open their Linkedin feed to discover how widely opinions differ. That said, there appears to be consensus among early-stage investors: the entrepreneur is a key factor for predicting startup success. When it comes to pinpointing the exact traits that define a successful entrepreneur, the answer isn’t as clear.
At Freiraum Ventures, we’re always curious about ways to make our investment screening more objective and scalable, and a recent statistic caught our attention. Adam Shuiab, Partner at Episode 1 Ventures, found that the founders of Europe's unicorns – those rare startups valued at over $1 billion – don't all hail from the hallowed halls of ETH Zurich or Oxbridge. In fact, the top five most represented universities combined produced only 15% of unicorn founders in Europe.
This data defuses the stubborn myth that elite institutions are the main breeding grounds for category-defining startups. It's a wake-up call for investors, accelerators, and policymakers alike. The next big idea could emerge from any corner of our diverse continent, and we risk losing out if we continue to solely focus on the big hubs.
As VCs, we must broaden our horizons. In light of new challenges, including limited exit opportunities and competitive deals, we need to look beyond the usual networks and create more opportunities for cross-border pollination of ideas. It also means introducing more policies that make it easier for startups to scale across the continent. The European Commission's efforts to create a true Digital Single Market are commendable, but we need to push harder. Harmonizing regulations, simplifying cross-border operations, and creating a unified European startup visa could unleash a new wave of innovation.
At Freiraum Ventures, our proximity to the entrepreneurship center of the Hochschule München gives us unparalleled access to ambitious teams at the very start of their journey. However, we've recognized the potential that lies beyond the usual suspects and make a conscious effort to look beyond the Munich ecosystem. This is where initiatives like Start for Future come into play. As a pan-European ecosystem, it aims to bridge the gap between startups, corporates, universities, and investors, fostering collaboration across borders and sectors to create a more interconnected innovation landscape. Tapping into the Start for Future ecosystem enables us to connect with a broad range of founders from varied backgrounds, each bringing unique perspectives to solve global challenges. In order to genuinely unite the European tech ecosystem, and democratize access to funding, we need more VCs to adopt a collaborative approach.
The fact that unicorn founders come from all corners of Europe is not a weakness – it's our strength. It's time we leverage this diversity to create a more collaborative, interconnected, and ultimately more innovative Europe.
The next European unicorn could come from anywhere. As investors, mentors, and ecosystem builders, it's our job to ensure that every promising startup, regardless of its origin, has the support it needs to reach its full potential. Only then can Europe truly compete on the global stage and lead the next wave of technological revolution.