[VivaTech 2018] How VCs Are Growing Tomorrow’s Euro-corns
Philippe Botteri and Bernard Liautaud, moderated by Emmanuelle Duten, Editor-in-Chief at Les Echos/Capital Finance, explored how venture capitalists foster European unicorns at VivaTech 2018. Recorded in Paris and available on YouTube, this panel from Accel and Balderton Capital discusses creating ecosystems for startups to thrive. This post, with three subsections, delves into their strategies. Connect with Philippe on LinkedIn and Bernard on LinkedIn. Visit VivaTech.
Building a Robust Ecosystem
Philippe highlights Europe’s progress in producing high-value exits, citing Spotify’s $30 billion exit in 2018, surpassing U.S. (Dropbox, $12 billion) and Asian (Flipkart, $20 billion) counterparts. This shift reflects a maturing ecosystem, with Europe’s 25 unicorns trailing the U.S.’s 110 and China’s 60. Bernard emphasizes the ecosystem’s growth since 2006, driven by experienced entrepreneurs, global VCs, and ambitious talent. Top French universities now see 20-30% of graduates joining startups, not banks, signaling a cultural shift toward innovation.
The availability of capital, especially at early stages, supports this growth. Bernard notes that European funds have tripled in size, fostering competition and higher valuations. However, late-stage funding lags, with European champions raising $1.5 billion on average compared to $7.5 billion for U.S. firms. Philippe sees this as a maturity gap, not a failure, with Europe catching up rapidly through global ambitions and talent influx.
Prioritizing Sustainable Growth
Bernard argues that unicorn status, often driven by a single investor’s enthusiasm, is a misleading metric. He advocates focusing on revenue and long-term impact, aiming to build companies with $1-10 billion in revenue over 10-15 years. A billion-dollar valuation doesn’t guarantee sustainability; some firms reach $1 billion with just $50 million in revenue, only to be acquired. Spotify, generating over $1 billion quarterly, exemplifies the ideal: a scalable, high-revenue business.
Philippe counters that valuations reflect potential, not current worth. A $1 billion price tag signals a VC’s belief in a $5-10 billion future outcome, balanced against the risk of failure. Rapid technology adoption drives larger outcomes, justifying higher valuations. Both agree that sustainable growth requires aligning capital, talent, and ambition to create enduring European giants, not fleeting unicorns.
Navigating Capital and Exits
The influx of late-stage capital, like SoftBank’s $100 billion Vision Fund, creates winner-takes-all dynamics in certain sectors. Bernard notes this gives funded companies an edge but doesn’t suit all industries, where multiple players can coexist. Philippe emphasizes liquidity for employees and founders, critical for retaining talent. Late-stage rounds and secondary sales provide this, delaying IPOs but ensuring stakeholders benefit.
Emmanuelle raises audience concerns about overvaluation and bubbles. Both panelists dismiss bubble fears, describing the market as vibrant, not overheated. Philippe notes that competition on hot deals may inflate valuations, but real metrics—consumer and B2B growth—underpin most successes. Bernard predicts cyclical downturns but sees no systemic risk, with Europe’s ecosystem poised to produce innovative, global leaders.
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