A key cultural difference in venture capital is that European VCs often request late-stage metrics like five-year financial projections from pre-seed companies. This contrasts sharply with the US/SF focus on market size, team, and vision at the earliest stages of a company's life.
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Many late-stage investors focus heavily on data and metrics, forgetting that the quality of the leadership team remains as critical as in the seed stage. A new CEO, for example, can completely pivot a large company and reignite growth, a factor that quantitative analysis often misses.
A European founder targeting the US market shouldn't dismiss European VCs. You might be the top priority in a European firm's portfolio, receiving more attention and support than you would as a lower-priority deal for a top-tier, oversubscribed Silicon Valley firm.
To win the best pre-seed deals, investors should engage high-potential talent during their 'founder curious' phase, long before a formal fundraise. The real competition is guiding them toward conviction on their own timeline, not battling other VCs for a term sheet later.
The fundamental risk profile shifts dramatically between venture stages. Early-stage investors bet against business failure, an idiosyncratic risk unique to each company. Late-stage investors are primarily betting on public market multiples and macro sentiment holding up—a systematic risk affecting all late-stage assets simultaneously.
In Europe, the value of startup equity is not widely understood. ElevenLabs' CEO had to convince new hires and even their families that equity was a valuable part of compensation, sometimes having to "almost force" employees to accept it, a stark contrast to the US tech scene.
A common mistake in venture capital is investing too early based on founder pedigree or gut feel, which is akin to 'shooting in the dark'. A more disciplined private equity approach waits for companies to establish repeatable, business-driven key performance metrics before committing capital, reducing portfolio variance.
Investors like Stacy Brown-Philpot and Aileen Lee now expect founders to demonstrate a clear, rapid path to massive scale early on. The old assumption that the next funding round would solve for scalability is gone; proof is required upfront.
The bar for pre-seed funding has risen dramatically. With an abundance of startups already generating revenue (e.g., $1M ARR), VCs are choosing these de-risked opportunities over pure idea-stage companies. This "flight to quality" has bifurcated the market, making it extremely difficult for pre-revenue founders to raise.
Bug Crowd's founder learned his Australian VC pitch, focused on predictable ROI (a "sausage machine"), fell flat in the US. American VCs wanted a massive, category-creating vision. He had to reframe his pitch from a "better pen test" to a fundamental shift in the "future of work" for cybersecurity to succeed.
Europe has vibrant startup scenes, but its core challenge is the "scale-up" phase. Promising companies often relocate to the U.S. to access deeper venture capital markets and a larger, more unified customer base for international expansion.
