It’s time to start celebrating European venture capital.
Disbursing the comparatively small sums of money involved in European venture capital can be a thankless endeavour. Owing to the near-absence of an exit market in Europe for their portfolio companies and the many, by now endlessly chewed over, handicaps to operating in the internet sector on the Continent, VCs are up against almost hopeless odds, with success even less likely than it is for start-up founders.
Despite this, venture capitalists earn significantly less than their counterparts in private equity and banking. Associates’ salaries, in particular, can be surprisingly meagre. By and large, VCs are in it for the thrill of the chase and the love of contributing to the success of great new businesses. The best get off on spotting new opportunities and joining a team of plucky young things to help create new efficiencies and open up new markets.
The tech blogosphere, in its pathological short-sightedness, sucks up to VCs in private but mocks them in public. Of course, there are a few isolated exceptions: TechCrunch’s European writers have always had a closer relationship with Index Ventures than would appear proper. But, by and large, VCs get a raw deal from the hectoring and sceptical amateurs on the blogs.
Meanwhile, entrepreneurs have become accustomed to treating themselves as rock stars before they have any meaningful accomplishments to their name, going so far as to inculcate a celebratory culture around their failures. The bloggers are complicit in this fiction. There is even a conference now in Dublin named in their honour.
Yet when venture capitalists attempt the same sort of trick, they are derided for the naffness of it all. That is why celebrations of venture capital tend to occur behind closed doors, which is a pity. Last week’s Investor AllStar Awards, an annual bash thrown by GP Bullhound and supported by entrepreneurial favourites, was a template for the celebration of virtue higher up the food chain of the start-up economy.
A caustic observer might ask what, precisely, there is to celebrate about European venture capital at present. It is, after all, an industry in crisis. Its own investors, which operate slowly and strategically, are still in the process of shifting their attention away: they will need persuasion to reinvest in this failing asset class. Things will get worse before they get better.
That is a somewhat churlish assessment: one that forgets the value of optimism and celebration, both of which are vital to the growth and healthy functioning of under-powered ecosystems. The quality of investors in Europe is not yet as high as elsewhere, but championing the best may yet bring forth some undiscovered heroes.
There are many internet companies being built in Europe at the moment, undoubtedly more than ever before. Many of these are predicated on poor and unambitious ideas, and most are very poorly executed. But some are not. Supporting both entrepreneur and investor, two halves of the team that realises the grand visions of those young men with the audacity to remodel the world around them, is essential to our economic future.
It is perhaps worth meditating on why some entrepreneurs and journalists hold the opinions they do about venture capital, and asking whether those concerns are justified. The Kernel will be doing just that over the coming months. Certainly VCs are not all paragons of selfless virtue and entrepreneurial brilliance. In our view, however, they deserve a lot more respect than they are currently afforded.