Venture Capital: Sequoia Eyes Europe; To Set Up Base in London

February 13, 2020 | News, Venture Capital
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“Europe is two and a half times more capital efficient.”

Sequoia Capital, the storied venture capital firm that funded the likes of Apple, Google, PayPal, Dropbox, LinkedIn, Eventbrite, Airbnb, Stripe, and WhatsApp, is dropping anchor in London. According to The Times, Sequoia is planning a post-Brexit shopping blitz that could include British tech start-ups.

But the reasons could be more structural. Investing in European startups is cheaper on every count compared to their American counterparts: valuations, cost of living, cost of talent. Best of all, European startups appear to be coming of age – they are bigger, more sophisticated, more promising. (Sifted)

Sequoia is evidently serious and is hunting for a top-flight partner for its London office. According to The Times, it’s even tried to poach away talent from rival VCs. However, the position is still vacant. According to Sifted, there’s speculation swirling around these names: Jan Hammer from Index Ventures, Luciana Lixandru from Accel, Suranga Chandratillake from Balderton, or closer to home, Matt Miller, a Sequoia partner in California.

European attraction

A host of reasons makes Europe a compelling opportunity.

“The biggest challenge is that everything [in the US] is overpriced right now,” said Karen McCormick, a partner at Beringea, to Sifted. “When the US market gets too expensive, everybody looks to the ‘cheaper’ places where the incoming valuations aren’t quite as crazy as they are in the US.”

Paul Murphy, a partner at VC firm Northzone, thinks it’s smart of Sequoia to target Europe. “It’s two and a half times more capital efficient,” he told Sifted. “Here you can be a pretty average VC and do well.”

And interest in European startups is on the rise.

2019 was a record year for European startups with companies raising over $36 billion–a five-year high according to Crunchbase.  Further, European startups raised over $7 billion more than what they did the previous year, with year-over-year growth tracking at 25 percent.

It may also have something to do with the improving quality of European startups, according to Albert Wenger, a managing partner at New York-based Union Square Ventures. Promising startups are sprouting all over the place and evidently, a new generation of entrepreneurs has emerged.

Teething troubles

Sequoia will, of course, have to network hard to get its foot in the door of the best VC deals in Europe. It will have to compete with experienced, deep-pocketed local VC firms that are already well-entrenched in the Continent with decades of experience.

But culture could work in favor of Sequoia. Some European startups prefer to work with US VCs. The reasons include their expertise and the prestige of getting funding from a legendary name like Sequoia.

But most of all, it’s their operating style and culture – many of them were founders themselves. That makes for a big difference in relationship-building.

Related Story:  VC Giant Sequoia Capital Raises $3.4 Billion for U.S. and China Investments

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