Startups across Europe are being held back by a limited availability of investment, according to one of the continent's top venture capitalists.
Speaking at Hy! Summit in Berlin, Zurich-based Dr Klaus Hommels of Hommels Holding, revealed that there simply was not enough people willing to invest the kind of cash to get startups to a stage where they were not struggling.
“This is something we need to structurally address, so that we have people in Europe who can write $20-40 million cheques in order to keep the companies here,” Hommels said.
“Looking here at the successful European companies, there has to be a lot of money invested until they get to a bigger defensible stage. I would very much wish we were in a position to do that a little more independently in Europe.”
The whole is greater
Hommels believes this is currently Europe’s ‘achilles heel’, but he suggested there was a solution for those venture capitalists that were simply unable to invest the required funds to make a startup successful.
“The big successful VCs are bigger than we are. If we are not big enough, we have to team up with others,” Hommels continued. “If we are more generous with early-stage companies, they are more successful and they have more maneuvering room.”
Many of Europe’s top startup incubators currently operate in or around Berlin, including Axel Springer-backed, Project A Ventures, which counts a number of advertising technology firms in its portfolio.
Project A’s co-founder and managing director, Florian Heinemann, hinted to PerformanceIN that VC’s needed to see an upwards trend in exits before they were comfortable enough to open their wallets more regularly.
“More VC money could help to accelerate and strengthen this process,” Heinemann said.
“With more significant exits happening in Berlin, and there are several candidates for this, more venture capital is likely to be available to entrepreneurs.
Startups left wanting in Europe
Heinemann’s thoughts on funding for exits were echoed by Peter Borchers, founder and head of Deutsche Telekom incubator, Hub:Raum, who told PerformanceIN that while the availability of money was increasing, Europe is still behind other markets.
“We have seen a significant increase in seed money over the last two years in Germany,” Borchers begins.
“There still is a huge gap when it comes to Series A, B etc, though. I hope that - based on relevant exits to come, this gap will become smaller in the future.
“The investments by Sequoia, Union Square and Bill Gates etc, during the last 12 months into Berlin-based startups, are a very positive signal. A big unsolved problem though, is the missing exit perspective in Germany and Europe.”