3 ms·

385M USD is way too much for EU investors. They usually invest 10x-100x less. So the alternative without US investors would be to have no startup of this kind -

385M USD is way too much for EU investors. They usually invest 10x-100x less. So the alternative without US investors would be to have no startup of this kind - great job, that will really help EU grow!

anonylizard 3y ago
What makes US investors so uniquely ambitious and generous? I'm starting to appreciate the US financial sector more and more.
- hospadar 3y ago
  It might not be that they are "uniquely ambitious and generous" but rather that the US has a much greater wealth disparity on average, so the rich are much richer and presumably have a lot more to invest. https://en.wikipedia.org/wiki/Gini_coefficient https://en.wikipedia.org/wiki/Gini_coefficient
- h_ko 3y ago
  Pension funds. European pensions are run as insurances and/or financed via taxes. Thus, there is no investment capital from pensions. The U.S. is quite the opposite, and that fact alone probably explains > 60% of the gap in VC financing.
  - snowpid 3y ago
    some people just use the governmental pensions (like in Germany) which aren't necessarily from a fund so they aren't funds at the beginning. I heard France just aloud pensions funds to use for VC financing. My opinion this is one of the big reasons for the lack of strong startup investments. The other one is the lacking financial union.
- dukeyukey 3y ago
  They have lots more money. Which probably originates to climatic and geographic reasons, but more recently due to the _massive_ destruction of wealth in the world wars. It's very hard to build up a wealthy middle class when every few decades millions die on the battlefield.
- throwaway55671 3y ago
  The US investors just have so much more disposable cash they can risk. EU investors are looking for safety because losing 100M EUR means they lost literally everything. Their "risky volatile investments" part of the portfolio is 1-5M EUR in total, usually even less - and split that between at least 3-10 startups. And there's much less people with money overall, so you can't raise large enough VC funds. The usual EU investor is simply going to buy some real estate instead of participating in VC funds - still great returns, very low risk. The more progressive ones will maybe try some real estate development projects. No need to think about this software thing. The angel investors I met with that had portfolios of 5-20M EUR wanted to invest 20-50K EUR into our startup, definitely not more.
- throwaway4good 3y ago
  Le privilège exorbitant ...
- IanCal 3y ago
  The US is a very rich country.
whiplash451 3y ago
Let’s fix the root cause instead of leaning in to a subpar EU investment funnel. EU has billions to invest in AI. I don’t buy that EU has “much less money than the US”.
- FredPret 3y ago
  Though both areas are very rich, there’s a lot less total wealth in the EU than in the US. Due to taxes, this is especially true for rich Europeans vs rich Americans. In the below report, it looks like Europe with it’s much larger population clocks in at a total wealth of 110T, while the USA + Canada has 150T. That’s 600k per adult in N.A. vs 200k per adult in Europe. More specifically, it looks like 1%ers in the US are worth USD 7m, but in Europe the 1%ers are worth USD 1.5m. I’m not denigrating Europe or the European way, just pointing out differences in the capital environment. [page 142, 144 of https://www.ubs.com/global/en/family-office-uhnw/reports/global-wealth-report-2023/_jcr_content/mainpar/toplevelgrid_5684475/col2/linklistnewlook/link_copy.0557094298.file/PS9jb250ZW50L2RhbS9hc3NldHMvd20vZ2xvYmFsL2ltZy9nbG9iYWwtZmFtaWx5LW9mZmljZS9kb2NzL2RhdGFib29rLWdsb2JhbC13ZWFsdGgtcmVwb3J0LTIwMjMtZW4tMi5wZGY=/databook-global-wealth-report-2023-en-2.pdf https://www.ubs.com/global/en/family-office-uhnw/reports/glo...]
- throwaway55671 3y ago
  The EU doesn't invest, the EU provides subsidies with many strings attached. One of the strings usually is "can't be used to pay shareholders" (as in wages, not just dividends). Also, the subsidies are usually provided after the fact (e.g. a project is completed) and you need a loan to actually do the project. That's a risk, and banks don't like providing loans to small companies without predictable cashflow; they would do it only if a shareholder with enough assets personally underwrites it - another huge risk, now a startup can destroy your whole life. If you meant the investors of EU - please show me where you got the data, because the official EU data suggest otherwise. People simply aren't that rich around here, which is a downstream effect of the much slower, smaller economy.

anonylizard 3y ago

What makes US investors so uniquely ambitious and generous? I'm starting to appreciate the US financial sector more and more.

hospadar 3y ago
It might not be that they are "uniquely ambitious and generous" but rather that the US has a much greater wealth disparity on average, so the rich are much richer and presumably have a lot more to invest. https://en.wikipedia.org/wiki/Gini_coefficient https://en.wikipedia.org/wiki/Gini_coefficient
h_ko 3y ago
Pension funds. European pensions are run as insurances and/or financed via taxes. Thus, there is no investment capital from pensions. The U.S. is quite the opposite, and that fact alone probably explains > 60% of the gap in VC financing.
- snowpid 3y ago
  some people just use the governmental pensions (like in Germany) which aren't necessarily from a fund so they aren't funds at the beginning. I heard France just aloud pensions funds to use for VC financing. My opinion this is one of the big reasons for the lack of strong startup investments. The other one is the lacking financial union.
dukeyukey 3y ago
They have lots more money. Which probably originates to climatic and geographic reasons, but more recently due to the _massive_ destruction of wealth in the world wars. It's very hard to build up a wealthy middle class when every few decades millions die on the battlefield.
throwaway55671 3y ago
The US investors just have so much more disposable cash they can risk. EU investors are looking for safety because losing 100M EUR means they lost literally everything. Their "risky volatile investments" part of the portfolio is 1-5M EUR in total, usually even less - and split that between at least 3-10 startups. And there's much less people with money overall, so you can't raise large enough VC funds. The usual EU investor is simply going to buy some real estate instead of participating in VC funds - still great returns, very low risk. The more progressive ones will maybe try some real estate development projects. No need to think about this software thing. The angel investors I met with that had portfolios of 5-20M EUR wanted to invest 20-50K EUR into our startup, definitely not more.
throwaway4good 3y ago
Le privilège exorbitant ...
IanCal 3y ago
The US is a very rich country.

whiplash451 3y ago

Let’s fix the root cause instead of leaning in to a subpar EU investment funnel. EU has billions to invest in AI. I don’t buy that EU has “much less money than the US”.

FredPret 3y ago
Though both areas are very rich, there’s a lot less total wealth in the EU than in the US. Due to taxes, this is especially true for rich Europeans vs rich Americans. In the below report, it looks like Europe with it’s much larger population clocks in at a total wealth of 110T, while the USA + Canada has 150T. That’s 600k per adult in N.A. vs 200k per adult in Europe. More specifically, it looks like 1%ers in the US are worth USD 7m, but in Europe the 1%ers are worth USD 1.5m. I’m not denigrating Europe or the European way, just pointing out differences in the capital environment. [page 142, 144 of https://www.ubs.com/global/en/family-office-uhnw/reports/global-wealth-report-2023/_jcr_content/mainpar/toplevelgrid_5684475/col2/linklistnewlook/link_copy.0557094298.file/PS9jb250ZW50L2RhbS9hc3NldHMvd20vZ2xvYmFsL2ltZy9nbG9iYWwtZmFtaWx5LW9mZmljZS9kb2NzL2RhdGFib29rLWdsb2JhbC13ZWFsdGgtcmVwb3J0LTIwMjMtZW4tMi5wZGY=/databook-global-wealth-report-2023-en-2.pdf https://www.ubs.com/global/en/family-office-uhnw/reports/glo...]
throwaway55671 3y ago
The EU doesn't invest, the EU provides subsidies with many strings attached. One of the strings usually is "can't be used to pay shareholders" (as in wages, not just dividends). Also, the subsidies are usually provided after the fact (e.g. a project is completed) and you need a loan to actually do the project. That's a risk, and banks don't like providing loans to small companies without predictable cashflow; they would do it only if a shareholder with enough assets personally underwrites it - another huge risk, now a startup can destroy your whole life. If you meant the investors of EU - please show me where you got the data, because the official EU data suggest otherwise. People simply aren't that rich around here, which is a downstream effect of the much slower, smaller economy.