By Neil Rimer
In today’s flat world it has become imperative to have a global plan from the onset. Focus on developing a global network so you can scale your companies globally while maximizing the advantage of local economies. While U.S.-based venture capital firms initially assume that if you win the U.S., the rest will follow, European V.C.s have had to know how to think about multiple markets at once. You need to be able to build a business that’s globally scalable and that’s where working with European entrepreneurs can help.
We’ve been asked to share a few thoughts on the best ways to work with European entrepreneurs. There’s no magic bullet, but it pays to be knowledgeable about the regional differences that span the Old Country. Being sensitive to and appreciating the subtle differences in which business is conducted in different countries can make or break a deal. Working with an entrepreneur in Estonia is different than fostering one in Paris.
Here are few tips on getting the best out of navigating the Old World.
- Don’t get lost in translation.
While most business is conducted in English, there is no replacement for knowing the local language. Knowing what goes on during lunch breaks, in the mail room and in the backroom is important for understanding local context. Our partners speak a dozen languages. While it is true most of our CEOs will speak English, it’s key to be able to engage with lead staff who speak other languages. Communicating with them on this level fosters trust, confidence and mutual respect. - Help to de-risk the riskiest endeavor of their lives.
Being an entrepreneur in Europe is a huge deal. Unlike in Silicon Valley, where being an entrepreneur is lauded, being an entrepreneur in Europe is viewed as a big risk - especially if you fail. It’s harder to re-integrate after a business fails, so learn how to structure a deal with that in mind. You have to learn how to “de-risk” an endeavor that is likely to be the riskiest deal in someone’s life. Entrepreneurs in Europe who don’t have that confidence, may not take the risk., so you have to occasionally structure a deal to encourage them. Seek out the entrepreneurs who are going for the biggest possible play. European entrepreneurs are far less likely to go for a doubling down. For instance with Skype, we had to create a safe environment for entrepreneurs who were concerned about entering the U.S. borders. - Help your entrepreneurs help you: Reach out to and educate them.
European entrepreneurs haven’t been around venture capitalists as long as U.S. entrepreneurs have, and there’s no central Sand Hill Road in Europe. Europe has historically relied more on angel investors to fund start-ups, so educating entrepreneurs and investors on the value of taking institutional money is critical. With pockets of innovation spread over several different countries, you can’t expect entrepreneurs to find you, you have to find them in their native environment and pitch your wares. Be willing to educate your entrepreneurs on the value of venture capital at the same time you are providing capital. You have to be able to explain the nuances of a term sheet and put them in touch with people whom they can trust.
- Not everyone can or wants to move to Silicon Valley, particularly with today’s immigration climate.
You have to be willing to be flexible to make things work, even if it’s not in Silicon Valley. De-centralize your business to work with the best entrepreneurs wherever they may be. This could mean you work with a company that may have business development in the U.K., headquarters in Madrid, research and development in Prague, and sales offices on the West Coast of the U.S. It pays to be flexible and capable of running a de-centralized business.
- Stick close to the best foundational start-up employees.
This is a longtime issue for European start ups. It is really hard to find start-up employees that are willing to give a company its all from its inception. It is critical that the venture capitalist be able to hire two to 10 employees from their network regardless of where they might live. Understand that they too feel the risk of new ventures and are critical for setting the culture and tone of the company during its formational years. Have a strategy for shaping company culture through the founding employees. Do you want it to be lighthearted? Scrappy? Entrepreneurial? Having the right type of employees and a game plan for executing on culture is one of the most important things a V.C. can do.
