Why European VCs aren’t “Entrepreneur Friendly”

If you’re a European technology entrepreneur and haven’t read it already, I strongly recommend you have a look at this WSJ interview with Nick Halstead, whose company DataSift just raised $6m from a couple of A-listers in the US.

The article makes a good point about the fact that European VCs tend to decide what companies they invest in based on revenue, financials and 3yr P&Ls rather than the market size, product innovation and team. They’re very risk averse and care much more about short-term wins (read: revenue) than anything else. Don’t get me wrong, I think all companies should have revenue at one point, but the Facebooks of this world always focus on the product until they find something that shows hockey stick growth rather than trying to win a buck or two here and there. And that takes time.

Anyway. I don’t think the problem is that European VCs are risk averse and not entrepreneur friendly. I think that’s a consequence of a bigger problem: most European VCs are not run by entrepreneurs. I don’t mean any disrespect as I think they have their value in the world, but most of the venture funds in Europe are run ex McKinsey and Bain consultants. Really. Have a look at the top 30 and, with a few exceptions, you’ll notice that most of the partners are former P&L guys. And let’s not even get into the committees, things get even more complicated at that stage.

Conclusion? IMHO, European VCs shouldn’t be more entrepreneur friendly. They should get more entrepreneurs as partners. Index, Accel, Atomico, Mangrove are doing this brilliantly, and PROfounders went all the way through and decided that all their partners should be entrepreneurs as well. Once they do that, partners will start being friendly and take more risk because, well, they’ve been there and know how it feels. And that’s what we need in Europe.