Europe is very interesting as a place to start a new fund

This piece is derived from Vitaly Golomb’s talk at Startup Istanbul 2014.

Startup here, startup now.

So first of all from the standpoint of investors and the reason that we greedy investors are starting a new fund here is because Europe is actually very interesting as a place to start a new fund. There’s a lot of advantages.Europe produces higher venture exit multiples than the US meaning for every dollar you invest you can get more back. The European exits are smaller, right, but the entrance valuations are three to four times lower. The big reason for that is because it’s a lot cheaper to start a company here. An apartment in San Francisco costs about at least thirty five hundred dollars a month  to rent. There are  parking spots in San Francisco more expensive than houses in Istanbul. That’s a big reason right.

It’s a startup Olympics! Everything is more expensive.

Engineers cost a hundred twenty thousand dollars  a year on average, junior engineers. so Europe produces  half as many exits as the US right now. One-third of which are called home runs.100 million-plus  exits but only with one-fifth on the money. That’s actually very interesting, very attractive. If you look at these big exits the cash and cash multiples in the US are about 4.5X which is lower than Fundersfund investors when they are raising money.They need to get 6X to get the minimum performance that they should be giving.

In Europe that number is much bigger (7.2X). Europe is very interesting this is why you see new funds announced every other week in Europe right now. And they went away after the dot-com burst, there was only few funds that really survived. There’s a lot of new things going on.

So you’re going to have access to more capital as founders in Europe. It is bound to happen, it is happening.

 

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Paul Njoro

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