Startups funding // differences in the different parts of the world
Given Techstars’ global footprint, I’ve been thinking a lot about the US vs Europe when it comes to early stage innovation and why there is such a gap in terms of the volume, scale and name recognition of technology companies each region has produced.
From mindset to market size and regulation, there are a number of factors at play. But after having talked to hundreds of LPs on both sides of the Atlantic, I’m convinced that the key difference by far is venture capital funding. And here’s why:
- University Endowments: Think about Harvard, with its colossal $50+B war chest. Yale has $41+B, Stanford $36+B, and Princeton $35+B. All of them fueling venture capital and the next big startups. Now, compare that to Europe’s top players like Cambridge, sitting on a rather modest £9B. This isn’t just a gap; it’s a chasm. US universities are venture capital powerhouses; Europe’s, not so much.
- Pension Funds: US pension funds are not just about safe retirements; they’re about bankrolling tech breakthroughs. With portfolios like CalPERS’ $400+B, they’re diving headfirst into high-risk, high-reward ventures, seeking blockbuster returns. Across the ocean, European pension funds tread more cautiously. Sure, they’ve got the cash, but they’re playing a different game. It’s less about chasing the next tech unicorn and more about preserving wealth with a steady hand.
- Corporate Venture Capital (CVC): Europe’s CVC scene? It’s like a cautious chess game, eyeing safe, late-stage investments for potential acquisitions. In contrast, the US is playing high-stakes poker, betting big on disruptive, early-stage startups. US CVCs poured $79B into the startup pot recently, showcasing their appetite for innovation risk.
- Family Offices and HNWIs: While American HNWIs are busy injecting their wealth into the veins of startups (think: 15% of their portfolios), Europe’s wealthy are drawn to the classic charm of arts and the solidity of real estate. Venture capital? Not so much.
The US-Europe funding divide in early-stage innovation isn’t just about numbers; it’s a tale of different investment philosophies, risk appetites, and cultural priorities. To bridge this gap, Europe needs more than just money — it needs a mindset revolution.
As a European and the CEO of an investment business that has been actively backing hundreds of European startups, I’ve been thinking about how to try to change this. I’m still working on an action plan, but curious if any of you has strong views about what Techstars could do to convince more European capital allocators to focus on early stage innovation?
