How Raise Funding in Europe

Hello everybody. Wow, kicking it off with 263 people live here in Silicon Valley. My name is Adeo Ressi, but we're not talking about Silicon Valley today. We're talking about Europe, right? And we're going to be going over, you know, how to raise funding for your startup in Europe. And there are a lot of great companies coming out of Europe today. We have a great guest. Before we invite her on, we're going to give people a couple minutes to come in, and let me just do a quick intro. The Founder Institute, which I am the CEO of, is a global program that helps aspiring entrepreneurs launch new businesses. If you're thinking of launching a business anywhere in the world, we're enrolling in almost 50 cities right now. You can go and check out the program at fi.co/join. If you'd like to create a program in your city, maybe a city in Europe where we don't already operate, you can learn more about launching a chapter at fi.co/lead. Alright, so we've got a very special guest today who's probably the leading expert of startup funding in Europe, and she's the founding partner of Seedcamp, Reshma. Seedcamp is one of the largest seed and most successful seed accelerators across Europe. They bring all kinds of great companies from all around Europe into their central program, and they provide seed funding. They're launching a new fund next year So they provide up to $500K in seed funding. So without further ado, if you're thinking of raising money in Europe, you should get to know Seedcamp. But before that, let's bring her on stage here. Hey there.

Hey, really great to be here.

Yeah, no, exciting. We're already at 600 people. We expect over 2,000, so it's going to be a big day. I gave the super brief overview because you run a program as well as provide funding, so maybe you can tell us a little bit about that as well.

Yeah, sure. For our program, I mean, it covers both. You know, if you're a founder and you're targeting a pre-seed round or a seed round, we really aim to be your first choice investor. And so if you're coming to us, the three things we excel on and aim to provide for our companies that we support What would support is around learning. So we have a strong group of our team. We have experts in residence that are really operational experts. And then, of course, a broader mentor network that stretches Asia, Europe, to the US to bear in terms of helping founders and their teams really grow and learn. Second is a network. Network underpins everything. And so having that kind of tier 1 quality network. And the third is access to capital. So our capital up to sort of $500K that that we'll put into pre-seed and seed rounds, but going from that as you're growing and scaling to again get the choice in your hands versus I think in Europe, probably some of the people who are listening will appreciate the choices have often been in the investor's hand. So we really want to change that dynamic, and as founders we want you to really choose who you bring along in your journey.

Okay, so learning, Capital, and what was the one in the middle again? Access?

Network.

Network, sorry, access to network, right. So those are the three pillars of SeedCamp, and you run a program. So does everyone that gets investment from you go into the program, or do you invest in some people that don't go into the program?

No, absolutely. So probably one of the biggest benefits of being part of this network where we've invested in, you know, 220 companies now, is a lot of that peer-to-peer access and learning from each each other as well. So all our seed companies as well as pre-seed companies go through, go through program, the program, and we sort of, the onboarding is the same. After that, we cater some of the things differently to companies that might be further along than others that are, you know, just starting off. And that can be, that doesn't have to be whether you're pre-seed or seed company, you know, either one of you can be in different parts of your go-to-market as such.

Really, the program is a way to leverage all the value that you're building on top of the capital.

Exactly right, yep.

So earlier this summer you said that in the early stages it's easier to raise capital now in Europe than in the US. Yes. And I may be paraphrasing, but you said yes. Why do you think that? You know, you see a lot of deals, so you have data. I mean, is there What do you think has changed, or what's the basis of that statement?

You know, a couple of things. I think back in June too, I think there was so much negativity coming out of the Valley that we were hearing about, and so we certainly didn't feel that in Europe. And I think especially at that time, and it's continued over the last couple of months as well, is there are so many interesting startups here and so many great founders here. There is a very positive climate right now in terms of investing in early-stage startups. So that was kind of my point when I was, when I was speaking this summer, is often you see Europe follow a lot of what happens in the Valley, and, and, you know, if the sentiment goes negative and goes down, you'll see that here. And, you know, I want to make— I wanted to make it clear at that point too that that hasn't happened here, and it's very much open for business.

Wow, that's great. I mean Even with the Brexit and some other news coming out of Europe, it hasn't slowed the pace at all?

No, and a couple of things, I mean, I talked about, I think especially if you're looking at the UK, and I see that, you know, other countries are looking at the UK a lot around certain policies, and one of the big things is around tax treatment. So there's programs called SEIS and EIS that give you a large, great number of benefits for investing in, you know, risky technology businesses. And give you tax breaks around that. And you match that up with what has been a singular criticism about Europe historically, which is our capital has been financial, or oil money, or every other kind of money except tech money. And so now what you have though are third, fourth generations of founders who made tech money. And so you match that up, so these angels who've left the Googles, Yahoos, Facebooks here, the Skypes and AVG and a lot of these companies that have— ARM and so forth that have exited, they're now funding new businesses. So you're getting into this third, fourth generation where you have real tech money backing tech money. You match that up with tax benefits and you have an incredible growth in the quantum of investment that's ready to come to market and the quality as well.

Yeah, because, you know, if you're a tech entrepreneur and you've made money, you invest in tech. You're not going to go buy McDonald's or oil or whatever. It's just not what you know, it's not what you care about. All right, we're going to cover 3 things today. So for everyone, we're over 700 people live right now, you have a question about funding in Europe, how to get it, or anything related to that subject, type it in the chat. I got a team that's going to try and get it into the agenda. We're going to cover 3 things: the different funding options available, right, we'll go in that first for early-stage startups in Europe. Then we're going to go how startups in Europe can position themselves to get funded, right? So what's available, how to get it, and then, you know, What are some of the trends in Europe such as Brexit that are going to affect the future? I read the other day that Italy is now considering leaving. I don't know, I'm like, I don't know, that could be good, could be bad. Italy is kind of a drag at least in the startup world, and I'm Italian, so there you go. So let's go, remember if you have questions ask them in the chat, we'll try and get them done. So maybe, you know, I've looked at some different options in Europe. You know, one of the things that's different about Europe than in the US or other places is that crowdfunding is alive and well. Now let me give a definition for everyone, and then I'd love to hear your thoughts on this. So a lot of people confuse Kickstarter with crowdfunding. Kickstarter is not crowdfunding. Kickstarter is demand generation. So it's like, I am building a gadget, right, and 500,000 people are going to pay me $10 for this gadget, so now I've sold $5 million of gadgets. That's not funding, that's demand generation, right. Funding is I'm going to give you $10 and I'm not going to get a gadget, I'm going to get some stock in your company or some value in your company through some equity mechanism Crowdfunding in the US is still largely illegal and very regulated, whereas crowdfunding in Europe is much less so. Maybe you could talk to us a little bit about your experiences with crowdfunding. Is it really alive and well in Europe? Is it working? Is it an option even?

Yeah, so absolutely, and I think you hit on a couple of things. One is from the get-go it was legal, and it's been promoted to a large extent as a very viable option for fundraising for quality companies. And that's the other thing, which is that you need quality on a platform like that, otherwise that platform itself will implode, right? So it's, you know, one of the things that happens here is that kind of like when we talk about products and, you know, time to market, similarly with companies there's time to funding. And we'll get into this maybe a little bit later, but in Europe, as I've always said, it often takes twice the time for every single round that a US competitor would take. And so—

Yeah, it's easier in Europe because there isn't this fear factor, right?

Sorry?

It's easier in Europe because you don't have the fear factor, but it takes twice as long.

Yes, well, I mean, just in terms of fundraising. So I think where crowdfunding has come in, you know, and the fact that it's had a few years now to put a stable foot on the ground as such, is it became immediately part of the fundraising process as such for all kinds of companies, and I would say very high-quality companies as well. So it helped speed up that time to funding for a lot of startups, and what you see is, I think if you look at two of the more prominent players in the UK, Crowdcube and Seedrs, Crowdcube has been backed by a VC firm itself, with Balderton. Seedrs is well-backed as well, so you're seeing a lot of quality companies go on there. I mean, one of our companies, Revolut, is backed by, you know, Index Ventures, Balderton, Ribbit, another San Francisco fund, just, you know, came in into their recent round, and they actually went on to Crowdcube to crowdfund alongside.

Wait, so can I ask that— let's clarify that, because you brought up all these different options, and these— so Seedrs is one, Crowdcube is another big one, Now, but you brought up they do this alongside their VC round, or they do it before. Like, what is the timing that crowdfunding— because a lot of times the perception of crowdfunding is, um, oh, like early. And so, but how early is it? Before angel, during VC? Because you said quality companies, right?

Yeah, I mean, it's both. We've actually funded companies that have raised on Seedrs or Crowdcube first, come to us. We have companies that after Seedcamp raise on there, and now if you look at companies like Revolut, it's raised after having a couple of rounds from VCs. So now the one inherent point with a company like Revolut, or Mondo is another challenger bank that raised on there, is what they think of it as, it's bringing your customers on board your journey. So it's bringing your customers as investors into the business. So it's been seen as a very positive platform. It hasn't been seen as, well, if you can't get money elsewhere, you go on there. It's seen as, why don't you give your customers a chance to own a piece of the pie? So why wait until you go public? You know, why buy Apple when it's a public company when you could have bought it on a crowdfunding platform, right?

Oh, very interesting. So it's sort of stage agnostic. So back to your point, it needs to be a quality company, but it needs to have some sort of brand, if you will, or some sort of awareness, otherwise no one would buy it on the platform. But then, because it has this awareness, you're essentially getting your customers and the people that like you already to own a piece of the upside. So it's somewhat stage agnostic.

Absolutely, so a couple of hours have done it that way where they say, we have 200,000 customers, let's you know, let them own a piece of it, to some companies who are obviously just, you know, getting off the ground, and maybe we'll see them a few months later after they've been on a Crowdcube or something. So it is very stage agnostic.

What is, uh, what have you seen people raise, and you know, what do they need to do? Like, what are some logistics about it? Then we can move on to some other things like angels, but, uh, which I'm sure is—

Yeah, no, good question. I mean, you know, to talk about, so Just our own example with Revolut, we have other companies who've raised on there too. I mean, they wanted to raise $1 million, they got interest for $13 million.

Whoa!

Can you believe that? Yeah, so ultimately they still raised $1 million on it because that was the objective. That's insane. It is, right? I mean, in the US you're not used to that.

No.

So there was an article that came out, Crowdcube itself raised their own $5 million, well they tried to raise $5 million, they ended up with $8 million. On their own funding round just now. So, you know, it is— it's a direction Europe has gone in for a lack of, you know, other— you know, a lot of other choices, because historically it's been painful to raise funding here. So—

Oh, wow. So, um, is there anything— you know, we have a question from Tom on these platforms. Is there any expectations placed on the company by the platforms or the investors in the platforms? Do they have any say, or is this just really like, we love you, here's some money to own in the upside?

No, I mean, look, I think I don't want this whole chat to go down that direction because I know I'm not an expert, so we'll maybe keep that as the last question. No, there is. Look, there's a lot of information you need to share. So, you know, you need to be quite open and wanting to take on an option like this, right? So your competitors will see that information, obviously, and so forth. So you really want to—

Well, competitors might invest.

They might invest as well. You'll have to, again, you'll have to dig into whether that's allowed and things like that. I'm not going to— again, I won't comment on that. But, you know, we— whenever our companies have raised We have been involved in the process and been partners with it, so it has been a team exercise.

Okay, well let's move on to the next one, angels. This is probably, I mean, my guess is almost every tech startup has an angel. That angel may in fact be the founder, or maybe external angels. Angel investors are basically usually wealthy individuals, but not necessarily, who give you capital as a startup and often advice and guidance as well. Though the advice and guidance is less frequent now than it once was, but there was a day not that long ago where if you had an angel and they gave you money, you could expect to get advice as well, whether you wanted it or not. Now there's been a 58% growth in angel investment from 2012 to 2013 in Europe. Why do you think it's been growing so much? You mentioned that these tech people are recycling their money. Is that primarily what it is, or is there more?

There's definitely that. I mean, if you see, if you're getting exits now, you know, $100 million, $100 million plus, the way those have grown up in the last 5-7 years of fundraising is the founders often will still own a pretty large chunk of that company, which isn't what it used to be a decade or more ago in Europe, right, where you'd give away— you used to hear stories of that.

They were called in England managing directors, not CEOs, right? They were employees of the owners.

Exactly, so that's dramatically changed. You know, you're not giving away 30% of your business for $100K or $50K, which more than a decade ago that was the case. So at a liquidity point, founders and operators in the business— that's the other thing that's changed too, is we're getting more and more of that wealth spread across an early team. You know, they're starting to be at sort of 10, 20, 30% ownership stakes at exit. So you are taking a fair bit of liquidity off the table, you're recycling that, but as I'm— sorry, we discussed that offline, but there's schemes like EIS and SEIS, all these sort of tax benefits, and they're being replicated across other geographies in Europe, not just UK, but they're really helping to get a lot more money into that early ecosystem.

So basically you have these rich, or somewhat rich, former entrepreneurs, or sometimes they're entrepreneurs again, coupled with tax benefits that's creating a rise in angel investment. Who are some of the top angels in Europe right now in your mind that if you were an entrepreneur— well, I mean, it would be easy to identify a successful entrepreneur, but then there's successful entrepreneurs who become successful angels. So who are some of the people you consider to be great angels.

Yeah, they're going to probably get mad at me, right? Because they're now just going to get a few hundred people knocking on their door on LinkedIn and whatnot to connect with them.

Well, hopefully they're good companies out here. Yeah, so—

so, well, one of the— so I'll maybe name more companies than people, but, you know, the founders, operators, execs at X Betfair have become quite active angel investors in the— especially UK fintech. They tend to really understand it and have plowed that money in. Jeremy Yap, who spends his time all across a few different continents, we invest quite actively with him. And look, there's a number of those. I'm not sure— Jeremy's probably going to yell at me, but I'm not sure they would love to be named quite like this, so I'll refrain.

Well, no, I mean, well, let me maybe ask the question another way. So rather than sort of single people out, of course, you know, you can use tools like AngelList. You can sort and figure out who's sort of doing the most deals. Someone asked a question about AngelList, but I'll save it for a minute. But how would you go and identify some of the top angels in Europe? One of the problems with AngelList, for those of you who are here and we're talking about angels, is that it's not really well covered in Europe. It's more of a US phenomenon. In fact, most of their deal tools aren't even legal in Europe yet. They're working on getting it in London, but so AngelList is not the necessarily the only place to go. So if you were in a country like Poland or Italy or France, what would you do to find some local angels?

I mean, I guess— good point. We do actually ourselves use AngelList quite a bit, and there's a fund called Emerge.be that only invests— it's a Belgian-based fund of angels, and they've invested quite a lot with us, and they only invest through AngelList, for example. So I mean, I think it's starting to grow here for sure, but But we're obviously in a position where a lot of our network continues to grow because it's our mentor groups, and they're exiting and becoming angels. But I'll also kind of trawl through CrunchBase and look at announcements on tech.eu, NextWeb, TechCrunch, Tech City News, and things to see whose name keeps popping up on people who are saying, hey, so-and-so— Tabet, who's one of our founders of TransferWise. Every company who raises from him uses his name on, you know, raised from Tavit, right? So you'll see some of these names pop up over and over again.

So keep abreast of the news, right? Because then you're going to find out the CEOs and the angels that are active, that are mentioned. And then obviously if you know, like, hey, there's this big company and it had an exit, obviously some of the management team will go on to be angels, so getting to know them. So just being aware of the news and awake will be super helpful in this area. And some questions are coming in, I'll save that question for next, but if you wanted to go raise angel, you need to create a target list, but what would you recommend some of the steps that you would do? Do a lot of people have angel before they come into your program?

For the seed companies, often. For the pre-seed, generally not. I would say, you know, the other thing I think angel investors in Europe are doing more is just being visible. So historically, they kind of work through family offices and things, right? Whereas the newer generation of who are becoming angels are just going, putting themselves out there. They're putting up AngelList profiles and, you know, getting pretty active, becoming visible. So I think, you know, whether you're in you're in Barcelona or Madrid, and you know, there's guys like Kibo Ventures and others who are basically angels who've built funds, you know, tap into their networks. And if you're in, uh, if you're in Tallinn in Estonia or, you know, in the Baltics, again, there's folks that have left Skype. There were 400 engineers up there, right? Some of them have left, some of the transferized people have left, and so there's always those those, you know, guys and gals who've left those businesses. So everywhere you go, these folks are much more visible now. I think you just have to tap into, you know, tap into and read who's been exiting, who's been, you know, who's involved in these clusters around whether like Google campuses that are spread across Europe nowadays, you know, various events that happen. I would definitely Talk to those.

So going to events, so basically let's make this a little more tactical, like step by step. So first you need to have a company, right, obviously. Assuming you have a company, you're doing something interesting, you've got, you're saying there's a proliferation now of these rich former execs and entrepreneurs, they're more public so they're going to events, so if you want to To find them, go to an event in your segment or industry or any sort of entrepreneurship event. I would guess that if you go to 10 events in a country, you may find 5 or 6 angels between, or more, right?

At least 2 to 4x that probably these days.

Wow, so it's really, yeah, of course don't go to just any event. You should go to an event related to entrepreneurship or an event related to your segment, but that should get you there. Let me go through some questions here. One of these related to this, you're talking about a lot of Western Europe and Scandinavia stuff. Katerina, what do I do if I want to raise in Eastern Europe?

Those are still some of the tougher regions. I give you that. I was just doing a little bit. I'm going to Estonia tomorrow, and I was just doing a bit of analysis. On what's been happening in the Baltics. And whether that's Central Eastern Europe, the Baltics, things have dramatically changed there too. I mean, literally a few years ago, you had no more than €25 million, €30 million worth of funds or money to put into companies. That's grown 3x, right? So we're still not at a level of what you see in Berlin and London, and then compare that to Silicon Valley, right? But it's going in the right direction. I think Central and Eastern Europe is tougher compared to any of the other regions. I don't know if I have an explanation.

But you source people in those regions to come to London and help them get funding. So assuming Brexit takes some time but there will still be some open border policies, you can apply to programs like Seedcamp to get—

Absolutely. We backed a company recently, UiPath, that's Romanian, and it's backed by a Czech fund called Credo Ventures. I would definitely check them out. And Early Bird out of Berlin and us, we backed a Bulgarian business. So, you know, absolutely. But I think credit to those founders, they did take themselves into— they're not based here, by the way, but they took themselves into the hubs, you know, into Berlin and London. To connect with the scenes that are so vibrant here.

Yeah, so they travel, right? They get off their butt and they go to these cities. So is that what— you met them because they came to you, is what you're saying?

Yeah, I mean, and it's a bit of both. So I help advise Credo Ventures, so I met them at their pitch there. There's something called Startup Yard in Prague as well. They host events, they have an accelerator. So I mean, there's options. I agree there's not as many. So get off— as you said, get off your butt too. And you know, it's not about moving here. It's not necessarily about that. But I think just like we tell our companies, you better get yourself to the Valley or New York every now and again to connect with that, with those ecosystems. Same thing if you're out in Romania, Poland, Bulgaria. Get yourself to London every now and again. And work yourself into these ecosystems.

Tickets are cheap. In fact, I'm going to Europe next week, just for everyone. We'll be announcing some events, but I'll be in Prague, Warsaw, Zagreb, Berlin, and maybe Belgrade. So I'm going to some different regions, maybe Sofia, we're debating a third city. Or fourth, whatever, fifth city, whatever that number is. So I'll be doing events about fundraising as well. Let's jump on to your area of expertise right now, seed accelerators. So these are structured programs that provide, you know, different things, usually some space, mentorship, and we covered what you provide earlier, and they also provide money, right? And so clearly you are, I would say, what, the number one program in Europe?

Probably.

To say. But, you know, are there any trends that you're seeing in seed accelerators that are useful? So you take people yourself that sometimes have angel and sometimes don't have angel, and you define that as pre-seed and seed. Is that correct?

Exactly. So our pre-seed check is, you know, currently at $75K, and starting next year we'll probably invest more around $100K, $150K. So that's already quite a large pre-seed check.

Is that pounds or euro?

Pounds, euros, dollars, these days roughly the same.

It wasn't always the case.

I know, I miss those days.

Anyway, so okay, so 75 for pre-seed, what about seed?

And seed, we tend to come into rounds that are half a million to a million and a half with our check of, you know, 150 soon to be sort of more $250,000-$300,000 type of checks.

So what are the trends you're seeing right now?

I mean, we can talk about it in multiple ways, right? Obviously sectors, founders, maybe let's take each one, and if you see questions coming in, I can cater to those. But sectors, one of the things we mention quite a bit at SeedCamp is positive bias and negative bias. So if you're a founder listening, I think, you know, one of your first exercises is to try to understand where you fall. So the positive bias sectors these days: artificial intelligence, because no one understands it and everyone wants to put money in it, I think. But, you know, there's, there's definitely positive bias around that. Fintech, if you're in and around London or doing, you know, doing something quite innovative, there's There's positive bias, probably not for, you know, a certain type of fintech that now is quite well covered, like foreign currency, for example. I don't know if you'll necessarily see much of a positive bias there, but, you know, prop tech, health tech are very positive biased sectors right now where founders are doing things. I think then there's always a bit of negative bias, so Food delivery, photo sharing. Food delivery, photo sharing is always one. Food delivery these days, whereas you know, literally 18 months ago, food, anything in food, right, food tech has been talked about. So I do think, because timing is so important, right, we talk about this at every, you know, in all the kind of dinners, lunches we go to, timing is very, very important. Timing of your product being too early, too late, but it's the same as fundraising, you know. And so figure out where you fall into that. But those are some of the sectors. I mean, definitely health tech, fintech continues to be super strong. We've done a couple things in legal tech recently, you know, looking at sectors which are maybe—

yeah, a lot of—

disrupted, can be disrupted. Now's the time to be able to disrupt those sectors. In terms of founders, I will say it's getting very competitive. You know, in a way, 5, 6, 7 years ago, you were dying to put money to work, and nowadays— and it was hard to find initially the quality of founders to do that with, whereas nowadays, as an investor, you're spoiled for choice with the founders because you are seeing repeat founders. They're exiting, they're coming back, you know, so there's alumni that are coming back, there are some mentors who start their own companies, there are operators who are leaving businesses like the Deliveroos and the Spotifys and so on of the world, PayPal Europe and so forth, that are leaving them and starting up businesses. So the quality of founders has risen dramatically, which is a good thing.

So from that perspective, I'm assuming that we've got a lot of ecosystem people and founders on the call or the webinar. If you're an aspiring founder, you know, how do you stand out then within that field of competitive strong players, right?

Yeah, and you know, there's no one thing you can do. I think you have to be excellent on several fronts. So team, you know, we're seeing teams that are much more comprehensive now. So it used to be either just a geek or just a business person who couldn't code. It's not that anymore. It is the combination. You will have a commercially-minded person alongside, you know, a tech co-founder together building a business. So already you can see these are better teams that are better able to produce what they plan to produce in terms of building, but they are also better able to communicate and take those products to market. So team, and really investing early into a co-founding team.

So really the first thing you look for is the composition of the team. Don't just have a tech guy or a business guy, have as well-rounded a team as possible. What are some other So when you say you're looking at greater founders, you're really talking about founders plural in a company, the founding team are getting higher and higher quality.

Definitely, yeah, so that's one. The second is technology, like I think we see this a lot, is the proliferation of similar concepts and ideas, and you'll see them instantaneously arrive on Crunchbase where a German one and a American one and a UK one and a Spanish one all sort of seem to raise money at the same time and kind of do the same thing. So I think, you know, again, to stand out is how's your approach truly, you know, truly significant and unique, and how does your technology give you a real moat and a real differentiator and ability, you know, defensibility.

So if 5 people are doing the same thing You need an angle that makes you better.

Yeah, and at least for guys like us who are trying to help build global businesses, you saying you're going to do that for Central Eastern Europe isn't attractive, or for the Nordics, or for Italy, or whatever it is, right? So we are playing in a very global field, and you can see that when companies are expanding you know, you're barely going to be left with your country if you can't go global, right? And you can even see that, you know, the Uber-China wars as such, right? It really matters, the speed and which markets you control and so forth. And it's hard to stay in one country. So maybe that's the other thing, is like we do want to see how fast you can expand and grow. It's not really— it's very rare you can build a one-country business that's a billion-dollar business.

So one question that we had was from Edward, you know, speaking of global, you still need to incorporate somewhere, and for European founders, the UK with Brexit, I don't know if that's a question, what would you recommend today If I want to build one of these globally facing businesses and let's say I'm in France or Romania or wherever, where would you incorporate?

No, definitely still the UK. Look, it's the most— it's transparent, very easy to— rule of law. Yeah, rule of law, that's a critical one. And it's very understood and already invested into by Asian investors, US investors, so it's very well known. And one of the things that when we talk to US lawyers, they will say is is once you go Delaware, you can't go back, and you know, as a top code. So you gotta be careful if you're going from Europe and you set up a Delaware corp, if it's not gonna, if it doesn't work for you one day, it's gonna be very difficult to go back. Whereas with UK, you can maneuver from there any which way. So we definitely recommend UK, and you know, I might be wrong, but I don't think the UK government's gonna be so crazy as to do anything to harm the leadership we have and the advantage we have with both the rule of law and the transparency and how employee options work and all of that sort of stuff that's very, very at market, at par with the US.

So yeah, I agree, and unfortunately it's just interesting to see what happens with Brexit around all that. Sunil was asking about revenue to get into the seed accelerators, does it matter? Like maybe how many, what percentage of companies do you invest in that have revenue or don't have revenue?

Yeah, good question. Honestly, so again, the answer I give to this for companies that come through here as well is it's all relative. It's, you know, we've invested at the pre-seed in companies that are pure, I mean, prototype or idea, and we know that they're going to be underground for a year and a half. And they're not going to have revenue. But that's okay because it's a very complex technology and it's a very complex business, so that's alright. Whereas if your advantage is sort of first to market, or it's an experience advantage, or whatever, you know, depends again. If we can in conversation both agree that speed is imperative, Then we're both going to either look to have seen revenue right when you come meet us, or at least soon after. So I think it's very relative to the business you're starting up and, you know, the depth of kind of how hard the technology is, to be frank.

Right, so you don't necessarily need it, but it's nice to have and certainly needed in certain kinds of business. So if you're doing a fintech business and you haven't demonstrated any revenue, that's probably a bad sign, right?

Absolutely, and especially if it's transaction-oriented and you make a fee on a transaction. I mean, it's— again, it depends case by case, but often you can launch something and get some very early, you know, demonstration of that revenue.

So we're going to go into the government, but before we do so, I just want to cover the 3 things. So crowdfunding, you can do it anytime. It's a way to get your customers invested in the business. Angels also you can do at any time. There's a lot more of them in Europe, so go out and about to find them. And then seed accelerators have been growing as well. They're pretty open-minded, providing funding and support at all different kinds of levels. And then, you know, I want to jump on now to the government because the government's been doing a lot too, and it I think just judging from the questions, we're going to skip over VCs because a lot of the people on the call are very early stage, right? So they're going to be dealing with crowdfunding angels and seed accelerators long before they deal with VCs. So what are some government programs out there? Are you impressed with the things that are happening?

Yeah, I mean, I think things where the government is encouraging the intrinsic kind of investing ecosystem through tax incentives and breaks and things like that. Absolutely, again, the UK is a leading light on that, but I know France has been looking and following some of those footsteps. The Netherlands as well has been looking, and so I think that's starting to spread elsewhere. There is a healthy— unfortunately or fortunately, I don't know— there's a healthy level of grant money If people haven't heard, let me just look, I have a slide on this where I talk about it. There's a Horizon 2020 program which is $2.8 billion of grant. Wow. And one of our companies recently got a $2 million grant. I mean, that's a lot of an A round, right? Like for no equity. So I mean, it's good and bad. I feel like obviously it's It's good when you know what to do with the money and you need it. It's bad because you don't get that external pressure to deliver, right, and get out to market. So there's Marco Polo II, Creative Europe, Euregia, E-U-R-E-J-A, and Horizon 2020. So those are some of the grant things. I'll talk about another couple of things that are happening in the UK. So the UK have something called the London Co-Investment Fund. And it's a £25 million fund, and it's picked about 7 or 8 of us as partners, and every company we invest in, they will match equity fund, you know, sometimes as much or even slightly more than what we're committing. So say we bring ourselves £200K to the table, now we can, you know, add £200K more to that, and you've got, you know, you've got £400K right off the bat, off of a, if you're raising whatever, half a million, to a million round or such. So there's that, there's the enterprise capital fund there, which, which invests in VCs, so maybe I won't cover that, but there's also the angel co-fund, it's called, and a lot of people don't know about this in the UK. They actually don't look at the underlying company being invested in, they look at the angel who's doing it, and will co-fund with the angel.

It's called the angel co-fund?

Yeah.

Wow. So yeah, that's interesting.

Absolutely. So LCIF, angel co-fund, enterprise capital funds.

Where can people go if I'm an entrepreneur and I want to see what the government options are? I mean, in my experience, government options are never easy, right? Just to let you know, like, people are like, oh, easy money. Now they're equity-free, so most— in most cases, not always, but They're mostly equity-free, so that's good, but like if you were an entrepreneur in Europe and you want to say, where do I go to figure all this stuff out?

I think it does cost a fair bit of money because I would say the ones who I hear being successful are the ones who are not desperate for it and have a little bit of money to put into actually applying for that.

Right, because you need lawyers, accountants, things like that to help you prepare the materials, get everything right. So it's not that easy, so you have to be a little further along. The question's coming in, so in general it sounds like, I would say that the government of Europe is very proactive, governments in Europe I should say, and the EU are very proactive. They do seem a little disjointed from my perspective. I don't know if you agree with that statement or—

Yes, I agree on both. The governments are proactive, they are even proactive from a policy standpoint. So some of the most forward-thinking regulation and opening up regulation has been by, you know, EU governments, right? So I know that's not directly funding, but basically it allows opportunity to actually build businesses. So, you know, that's been forward-thinking, but you're completely right, it is disjointed. So it might be in one country, but you try to take that elsewhere, you know, it doesn't— it's not mirrored elsewhere, right? So I mean, there's a bunch of us who are big proponents of a digital single market, and, uh, and, you know, all the rules and regulations along with the digital single market that can be applied everywhere. But now's not the time to get into that. So I agree with you, it's different.

Well, what is— so Laura was asking about hardware. So we've talked a lot about technology companies broadly, and there's a pretty big difference between software and hardware. So how would you help get— if you were a hardware company, are your options the same or different? Do you guys fund hardware companies?

Very, very few, I must admit.

Hardware is hard.

Hardware is hard, as everybody— and you know, there was a— I mean, there is There is a bit of focus in London around Internet of Things, but I think we're slightly on the down part of that hype cycle in that sense. There was a lot of hype for— again, it mirrored what was happening in the US around hardware and the next revolution, but it's been hard for a couple of the investments we've made to actually get product out to market. So we don't do it as much. I'm not the best at it, but I know like Startup Bootcamp has an IoT accelerator, so maybe that's one to look at. In a way, it's probably easier to find things that are hardware-specific because you ask that question, you're either going to get a clear yay or nay on that.

Right, most people are either hardware— and to your point, there's some dedicated hardware accelerators. Let's jump into now positioning to get funded. So we've talked about what the options are, some of the trends in Europe, and now I want to go take my company and get funded. There's an adage that European investors are risk-averse. Is that changing, you think? Because I mean, it comes up sort of with hardware. Hardware is a risky business, right? And you're like, I don't want to do it. So it's almost like, hey, there you go. Is it true that they're risk-averse, or are you seeing that start to change?

Yeah, I mean, I think it's culturally there, you know, for decades. I think that's something that you're not going to see disappear overnight, but it's changed dramatically in the last half a decade. And again, I think having money that's been made by being quite risk-taking and in technology businesses having that money come in pulls a lot of other money in to say, well, I know you built Skype, or I know you built PayPal Europe, or you built Yahoo here, and I'll come in alongside you, right? Or Betfair or other companies like that, I'll come in alongside you. So I think it is changing. I think, again, the hubs where, you know, like London and Berlin, you feel like everywhere everyone's just talking about technology. It does feel like, you know, the Valley or SF, right? Everything feels like— so all the trends that you see in New York and SF either have been here before or they're here right at the same time, or, you know, everything you want is available all the time. So I think the hubs dominate that much more, and that kind of thinking around being much more open to risk. So I don't think it's equally spread across Europe, but it's changing.

To your previous point, one of the best ways to overcome the risk aversion, etc., is to spend some time going to the hubs because you're likely to find investment there. You mentioned London and Berlin. Are there any other hubs that you would recommend people go to?

Maybe, you know, um, Pockets of sort of like being in Paris, there's a lot being done there to support an entrepreneurial ecosystem. You know, Stockholm's kind of naturally great for a lot of the university incubators that are there and companies that have been built there. But, you know, things like in Madrid, there's a Google Campus Madrid and one in Krakow as well. So there's starting to be these ecosystems where you meet people who think like you and talk like you, and you don't feel so alone anymore. A lot of the— Lisbon is a really fast-growing scene there as well. So I mean, I think it's actually better clear across Europe than if you're in the US. You know, I think in the US you're kind of like, well, I've got New York, Boston, or SF, me, you know, and that's it, right? Okay, maybe Austin, but where else do you go? Whereas I think in Europe you can go to any major city and there's a thriving entrepreneurial scene.

But there are some really big ones where people are less averse. Gustavo was asking, like, if an investor sees something as high risk, what might you do to show them it's not risky or convince them it's not risky? Is there anything you can do?

Yeah, I mean, I think, you know, that goes a little bit into communication and kind of how you put forth an argument. I think it's to understand What aspect is considered risky, right? Is it the technology itself? What are proof points that can prove out it works? Is it the regulatory framework? You know, are you going to get the licenses? Is the regulation going to change? Is it going to change the other way, actually, in some cases? Is it, you know, is it you're relying on certain choke points in your distribution channel? So I would say break it down. I mean, I think Just saying, "Oh, it looks risky," that doesn't help you, someone saying that. I think it's to try to understand what part is seen as being the risky part, and then you have answers to that, both in a, you know, here's the solution and here's the time it's going to take for that solution to play itself out.

Right, so one of the ways to do that is to— I would recommend speak with some angels casually, right, not officially pitching them. Listen to what their feedback is, and then you say, okay, they seem concerned about, let's say, regulatory issues. Then when you next pitch the angels, be super clear about, hey, we understand there's some concerns about regulatory issues, here's our plan to make those concerns or invalidate those concerns. Now you said capital is king when evaluating the European startups. What do you mean by that?

I think this is probably further down the stage of fundraising, right? I mean, I think we see whether you are competing with US counterparts or here across different geographies, having a war chest and having that capital to whether it's to pivot, to experiment more, to grow faster, really lock in multiple geographies, capital can mean the difference between success or, you know, low exit or death. So I think capital is a real differentiator for European startups.

So for the early guys, early people on the call, capital and king could mean, you know, capital is king could mean don't get in a situation where you're desperate raising a round. I mean, you're always— so I mean, every startup never has enough money, right? That's a certainty. But if you're really like days away from like personal bankruptcy or days away from getting thrown out of the office and you're running out raising money, that is not— that's a terrible position to be in. So sort of try and keep yourself as far away from that desperation mode as possible when you're raising, right?

Yeah, I think, you know, we tell our companies, if you come to us saying in 2 months we burn out and we're dead, we literally can't help you. I mean, of course we'll try, but, you know, probably very low likelihood. But, you know, come to us 3 to 6 months before, before you're going to run out, and then you can really devise a strategy of that next round, and you're going into fundraising from a position of strength rather than weakness, because people can smell the weakness.

Right, well, yeah, because you're like, when can we close? Can we do it now?

Now?

So what about like, well, there's a lot of things, and we're running tight on time, so if you guys have questions, pop them in. We want to answer them. I guess, so let's go to some checkmarks, and there's some other questions I'll try and get to as well, but like, okay, so you're going to go out and raise raise money, you said look, a team is really important to stand out, right? Probably properly incorporated in a good jurisdiction like London, which we talked about, right? What are some other things that you would say are super important? You said revenue maybe depending, so what are some other things that are like must-haves or really, really nice to haves?

I think we look a lot at how people think. So, you know, it's not about having a perfect answer to everything, but you can see when people are being quite superficial with how they cover the— you know, what are your channels for go-to-market? And it's just like throwing up names, right? Whereas, well, what is the right fit for your business, and what have you done to understand how those channels work? And I mean, that's the level of thinking And if you go deeper with questions, can the founder stay with you and continue to speak quite intelligently about those questions? So we look a lot at how you think as well. And again, in terms of traction, I think traction can be a number of things. We look at engagement a lot to really see where the product can go and where your target segment—

Can you clarify what engagement means? Well, let me define traction and then we'll go into your— because that's important. So we talked a little bit about team, we talked a little bit about properly set up, we talked a little bit about understanding your business thoroughly, right, and having a depth of knowledge there. Traction is one of these things. A founder hears traction like, what is traction? Traction is just demonstration that your business is achieving its goals or growing, right? And it can be user growth, it can be revenue growth, it can be many different things. So traction is kind of a big bucket, and you talked about caring about engagement as an early indicator of traction. So what does that mean? So I'm a founder, I got all these other things, how do I show you I have engagement.

Yeah, I mean, so we will ask a lot of questions around— I think especially if you have, you know, one user, or more than one user, right? But I think if you have a few users, it's trying to understand how important what you're building— if you're building something valuable, at some point someone's going to pay for it, and it's trying to understand what is of value to your users and how are they using your product and how does it, you know, help either help them generate more revenue or help them save more costs or make their life better or whatever it is. And understanding the pieces of your product that are really valuable and leading to engagement. So again, people like to throw up a lot of numbers, but beneath those numbers, you know, there is no real engagement there. So maybe they're somehow pumping money into it to get the growth, or, you know, it's just spreading, but nobody's really nobody's really engaged with it a few days later, or a few weeks later, or months later, or whatnot. So that's what we kind of look for.

So engagement is sort of what you would say the most important measure that the audience you're targeting actually cares about what you're doing, and that can be measured B2B, B2C, hardware. You know, back to the lady who was asking about hardware, you know, A lot of people consider engagement in hardware the success of your Kickstarter campaign, right? Because if you can sell a few hundred thousand or a few million dollars worth of product with a video, it means that people are engaged and want it, right? So it really depends on what you're doing. So in the last few minutes, like, we covered a lot of things, like, we got a lot of founders here, right? So hopefully all of them will apply to SeedCamp. because it really is a lovely— and I'm so proud of— program, and I'm so proud of what you've built. Tell me what some big advice would be that you would give them. Let's say they were your cousin and they were in— where— France or someplace, and you said, okay, here's the big advice for you today in Europe. What would it be?

I mean, inherently, I think try to work on something big, so something meaningful, something big. That's all relative, because you probably think you are. So I think make sure, vet it, and talk to people and see if you are working on something truly, truly big and meaningful. And the other is just to talk about it. I think probably in Europe less than in the US. Americans are often criticized for talking too much in the entrepreneurial world. Serves us well. So I think just talk about it a lot. And if you're going to get it in the hands of ultimately people, human beings to use it, then the more you talk about it, the better you're going to get real feedback about what you're building and how you're building it and so forth. And surround yourself with quality. Each stage you get to, quality really matters. Just keep striving to be around better and better, more relevant people and concepts and advice that you can.

So think big, get out and talk about it, right? Don't be shy. I agree, that's a huge problem I see with European founders. And with all programs like yourself and other things around the world, there's so many options for people to go out. And you go to the events, there's like 50 people, 70 people, maybe 100 people. Sometimes you see big ones, but they tend to be smaller. And then quality. If you can do those 3 things starting out as an entrepreneur, it will serve you well. Well, Rashava, thank you so much. Everyone out there, Seedcamp is truly one of the great programs in Europe. You should be honored if you can get to a place where you have the big idea, you're talking about it, the quality and everything else we discussed to apply and get in. Thank you for your time. I hope everyone learned a lot.

Thank you so much, everybody.

Yeah, this is lovely. All right, everyone, get funded! I want to see funding success stories after the great advice you got today. Thanks and have a good one, everyone. Bye!