Last month, just as London-based venture capital firm Felix Capital announced the closing of its fourth and newest fund with $600 million in capital commitments, we had a separate chat with Felix founder, Frederic Court on how competition in Europe has changed as many US venture capital firms have opened offices on the continent, including Sequoia Capital, Lightspeed Venture Partners, Bessemer Venture Partners and General Catalyst.
Unsurprisingly, Court said the expanded range of options is ideal for founders. He also told us that most European investors would rather stay with European companies or set up their own stores where they can have more influence. We thought that was an interesting part of a longer discussion; the excerpts below have been edited for length.
TC: A lot of the biggest American companies have moved into Europe in the last 18 months or so. What is the impact of all this interest on your work at the local level?
FC: Many of these companies that we already know well. They hire people who are already investors in Europe other other [venture] platforms. And overall great for entrepreneurs in Europe [and] a reflection of the evolution of the market.
Here we have seen more ambition, more talent and obviously more capital over the last few years as Europe has started to build not only local champions but also global champions like Spotify and Adyen and Farfetch, where I was lucky enough to be involved from day one as an investor. So yes, there is more competition, but there are also more options for founders.
You mention that these companies are hiring on other platforms, although I read somewhere that they had a hard time hiring because there aren’t enough investors with experience at the general partners in Europe and also because the mindset is different from American VCs which – until very recently – were growth oriented, while European VCs were more focused on removing risk . Does any of this sound true to you?
I think a lot of things are true. The reality is that we are in an industry where measuring success takes time. I mean, I’ve been in venture capital for over 20 years. We are not many. There is Fred [Destin] who launched Stride.VC and [investors at] Accel and Index which have been in this space for over 20 years and with a great track record, but it’s a pretty small community. So there’s a lot of great talent emerging, but with fewer success data points and therefore, yes, it’s probably been harder for people to hire.
I think there’s probably also a sentiment from many investors in Europe [that] they don’t necessarily wait to be hired by American firms. They really want to create local businesses. When we launched Felix [in 2015] we have found tremendous support from friends in the US connecting us to [limited partners] because when I started I had no LP connection. But we also found a lot of local support from people wanting to nurture local co-investors that they could work well with. It is therefore not necessarily easy for a European investor to suddenly join a team that is new and where the decisions will be taken, for the most part, in the United States. [compared with the opportunity they have to] be part of European platforms and have more influence.
It happens, however. Lightspeed has hired Paul Murphy from Northzone. Sequoia poached Luciana Lixandru from Accel in London. Did you lose someone in the talent war?
I’m sure many people on our team are getting calls. We talk about it quite openly. Frankly, the hardest thing about running a venture capital firm is building a team. [But] we have a certain way of doing things; we are truly a culture of “we” versus “I”. We have some great people who came to our firm and then left with great success, but the people who stayed and those who joined more recently are very attracted to this team culture. We choose our battles together, we win them together and we lose them together. And it’s really a culture that I wanted from the very beginning. Even our fundraising is done in a very open way, with the list of all our investors available to the [entire] crew. We don’t think we have to be secret there.
You say there is complete transparency in your LP base across the company. Are you trying to argue that other businesses might be more cautious about this, given that so many people have gone into building their own businesses?
LP relationships are usually something that is totally shielded from the rest of the team [but] we’ve been very open with our investors, putting them in touch with different members of the team to get to know them and also to validate what I’ve just described to you – that we work transparently and take decisions together.
Also, personally, this is a part of the business that I was exposed to quite late, and I would like [been exposed] earlier. This is a very important part [of being a VC] it is not discussed as much. If you join some of the big companies you mentioned, many partners or investors won’t immediately get involved in fundraising, because those companies are like machines in terms of fundraising. [based on] very solid past performance. When you’re starting from scratch, often the first six months to a year or two will be focused on fundraising, so that’s a key skill set, and we want our LPs to know the team and vice versa. It is a choice to do so.