State of European VC Market and its Structural Differences with the US

Historically, a lot of research and books have been written about the US venture capital markets. Strangely enough, there is fairly little to be found on European VCs. While I won’t be able to provide a peek-under-the-hood, I delved deeper into the VC market in Europe to understand how it differs from the US.

Why would this matter? If you’re an entrepreneur looking to raise a Series A in the next few years, you should better understand how to look and find your new investors.

State of European VC Market

The European VC industry has come a long way with investments doubling from USD 18bn in 2014 to USD 36bn in 2019, according to Crunchbase. Meanwhile, VC funding in North America grew by almost 50% from USD 90bn to USD 132bn. Europe is catching up fast but it is still punching below its weight as its share of global GDP standing at 21% but the value of its start-up ecosystem is estimated at only 10% globally.

Fund performance is also lagging for European VCs. Looking at net IRR and TVPI, Preqin reports that top quartile US funds have outperformed top quartile European funds over the past 5 years. However, Cambridge Associates reports that, on a <5-year horizon, average European VC performance is equal or better than US VCs.

So, what’s causing these differences in the top-line figures? Well, they stem from a few key structural factors: funding landscape, market fragmentation, and investment strategy.

Funding Landscape

For 2019, Preqin estimates the average US VC fund size is USD ~440m while it is only USD ~217m in Europe. While fund size does not explain differences in performance per se, there are economies of scale in deploying capital in a bigger fund structure.

Unlike in the US, the biggest European VC fund investors are government agencies (specifically European institutions), followed by corporate investors and private individuals. Many European countries still do not permit their pension funds to invest in VC funds, thus limiting the overall capital pool available to its VCs. In the past, this reduced size of capital pool in Europe has resulted in late-stage companies struggling to close financing rounds or looking for funding from non-European investors.

Market Fragmentation

The European market is fragmented across languages, cultural norms, consumer needs, jurisdictions, etc. A successful business model in one country does not necessarily transpose well to the rest of Europe. Even for Zalando, one of Rocket Internet’s portfolio stars, sales are still primarily driven by German speaking countries despite attempts to expand. For European VCs, this limits growth of portfolio companies to their home markets and, unless later-stage capital can be tapped, can limit their returns significantly.

Investment Strategy

Because of the fragmented market, European investment theses tend to focus more on geographies or language groups, while US VC funds tend to focus on specific industry niches or trends, which they research more deeply and build significant expertise on. Combined with the difference in fund size, this leads to different investment theses and corresponding drivers of portfolio performance: access to quality deals, follow-on strategy, and paths to exit.

Access to Quality Deals 

To attract the most interesting deals, US VCs can leverage their brand reputation, their networks, and their track record. US funds also benefit from having a concentrated and highly sophisticated innovation cluster in Silicon Valley. As such, US VCs have access to a broader pool of investment-ready start-ups, albeit at high valuations as many funds chase the best deals.

While there is less valuation inflation in Europe, local VC funds do not have a long history and need to be more proactive in developing their deal funnel. In addition, European innovation clusters are typically more spread out and tech transfer programs are less developed, resulting in a chasm between idea and growth stage companies. Some funds, like Seraphim in the UK, are trying to solve this by setting up feeder accelerator programs.

Follow-on Strategy 

US VC funds tend to cast a wide net in creating their portfolio before following through on the portfolio company most likely to reach a >10x return, i.e., the “unicorn” that will return the entire fund. In contrast, European VCs still place more emphasis on the existence of revenues and the path to profitability. Even though the European strategy might yield a higher number of successful exits, it cannot match fund performance that is driven by outliers, as shown by top quartile fund performance for US VC funds.

Paths to Exit 

Finally, US VCs are more successful at securing an exit through IPOs or trade sales. The US has developed equity capital markets that offer good liquidity to small companies. US VCs also maintain a strong network of later-stage investors as well as strategic investors. These relationships allow them to gauge whether a portfolio company would be a good fit and has reached its optimal maturity for an exit. Thus, US VCs can broker a deal much easier but also negotiate better exit terms than EU VCs.

Trade sales are the most common exit strategy in Europe, but they tend to be less lucrative than IPOs. Exit activity in Europe is more haphazard and VCs find it difficult to secure competitive prices for their portfolio companies.

Final Thoughts

In conclusion, European VCs are developing swiftly and are finding ways to adapt the traditional VC methodology to the European landscape.

Home-grown European VC brands have started to appear over the past decade to rival the well-established US brands.

Meanwhile, several new US VCs are developing investment strategies to invest in so-called Zebras (instead of Unicorns). To do so, they had to create new (but old) investment instruments, such as revenue-based investing. This investment strategy might also be more appropriate for the European market.

This article originally appeared on SANZARU Group‘s blog on 11-Jul-2020.


  7. Dealroom venture capital investment flows in Europe report 2017

Why are ESG KPIs so important? What’s holding them back?

Photo by Lukas from Pexels

Understanding a company’s current or potential future success has historically been determined using a combination of financial and non-financial key performance indicators (KPIs). Financial KPIs include things like cash flow, while non-financial KPIs focus on the drivers behind these that cannot be expressed in monetary units, such as customer relationships. These non-financial KPIs commonly provide context to interpret the financial KPIs and highlight risks and opportunities to the business over time.

Changing Views

In recent years, investors and managers are placing more importance on environmental, social, and governance (ESG) indicators. An increasing amount of data shows strong ESG principles can create long-term value. A review of 2000+ studies by McKinsey found that 63% of the studies determined a positive impact of ESG initiatives on equity returns (only 8% recorded a negative impact). A survey by Ernst & Young of 320 institutional investors found that 92% believed ESG issues have a quantifiable impact on company success and 68% said a company’s non-financial performance had played a pivotal role in their investment decisions within the last year.

Why is this important?

As customers, employees, investors, and regulators are growing more aware of ESG issues, companies with robust ESG management practices will be better positioned for long-term success. Having a strong ESG proposition promotes business model resilience and company longevity through revenue growth, cost reduction and risk management, and improved access to capital.

Revenue Growth

Environmental and social factors will be an increasingly important driver of long-term revenue growth as customers increasingly engage on climate change and civil rights issues. Failure to address ESG practices can even jeopardize revenues. For example, Facebook’s unwillingness to tackle content and moderation issues has resulted in the loss of advertising revenue from some major brands.

This is not limited to consumer brands though. Public institutions are more likely to award contracts to actors they trust can not only execute the mandate but also address issues around disruption of supply chain, human rights violations, etc. Being ahead of the curve on regulatory and legal change allows companies greater freedom to operate and to benefit from public incentives.

Cost Reduction and Risk Management

Non-financial KPIs can also reveal opportunities to help reduce overall costs by streamlining operations, reducing energy and water consumption, and improving resource efficiency.

Being engaged and delivering on ESG promises can also boost employee motivation and help attract quality talent. This leads to increased productivity beyond the increased cost associated with these types of initiatives.

Finally, unsatisfactory ESG policies carry long-term reputational and regulatory risk in the form of fines, penalties, or high legal costs.

Improved Access to Capital

Investors have long been aware that strong governance reduces the risk of material negative events. Environmental and social factors are now emerging as drivers of long-term value as they  provide a deeper understanding of asset allocation and investment decisions. It allows companies to avoid investments into assets and technologies that have a high risk of becoming stranded in the future.

A socially and environmentally aware public image can attract additional investors and secure access to future capital. The EY survey found that 96% of respondents have turned down an investment due to a company’s poor governance and 86% due to poor environmental performance. Investor initiatives like the Climate Action 100+ also indicate that this will continue to affect companies’ ability to raise capital.

If ESG performance criteria are so important, why aren’t all companies already doing this?

Well, some hurdles still exist for wider adoption.

ESG implementation can be challenging. Smaller companies might struggle to shoulder the burden to identify, monitor and report on ESG KPIs. Larger corporations require steadfast leaders who can convince their stakeholders to end “business as usual” and align with ESG best practices.

Furthermore, there are limits to ESG reporting. A study by Russell Investments found that less than 25% of sustainability criteria of ESG frameworks were material for many companies in its LargeCap universe. They showed that materiality indeed creates better performance but investments in immaterial ESG issues had no or negative impacts.

Even material ESG factors can give a misleading conclusion, depending on methodology. For example, while Walmart reports a sizeable volume of fossil fuels used, to account for their logistical activities, Amazon does not include it as they outsource their delivery activities to third parties.

Consistent and holistic reporting guidelines, tailored to the stage of the company, will stimulate further adoption, and show the true impact of companies’ activities and their value chains.

This article originally appeared on the SANZARU Group‘s blog on 07-Jul-2020.


  1. “To Investors, Nonfinancial Performance Reveals True Value of Business.” Sustainable Brands, 5 Apr. 2017,
  2. Henisz, Witold, et al. McKinsey & Company, 2019, Five Ways That ESG Creates Value,
  3. Maretich, Marta. “The Top Three Non-Financial Reasons Why Investors Say No to Deals.” Maximpact Blog,
  4. Ernst & Young. “Tomorrow’s Investment Rules 2.0.” 2015.
  5. Porter, Michael E., et al. “Where ESG Fails.” Institutional Investor, 20 Nov 2019,
  6. Leconte, Pierre. “15 Examples of Non-Financial Performance Measures to Track.” ClearPoint Strategy, 14 Apr 2020,
  7. Nelson, Mathew. “The Importance of Nonfinancial Performance to Investors.” Harvard Law School Forum on Corporate Governance, Ernst and Young, 25 Apr 2017,
  8. Steinbarth, Emily and Bennett, Scott. Russell Investments, “Materiality Matters: Targeting the ESG Issues that Impact Performance.” Harvard Law School Forum on Corporate Governance, 10 May 2018,

A Chat with Business Mentoring Luxembourg

This interview originally appeared on the Business Mentoring Luxembourg Blog on 04-Sep-2019.

Stephan Peters, Managing Director of SANZARU Group, has been a mentor with Business Mentoring Luxembourg since 2016 and has so far supported three mentees in different sectors. He shares his broad experience as an investor and and senior advisor.

Can you briefly introduce yourself? What is your background?

Thanks for having me over! If I had to describe myself in a few words, I’d say I’m a jack of all trades and a master of some. After growing up in Belgium to entrepreneurial parents, I returned to the Netherlands to study aerospace engineering, which gave me an affinity to technology as well as deep appreciation of the scientific method. After doing stints in investment banking, management consulting and private equity covering multiple sectors as well as four continents, I decided to re-connect with my entrepreneurial roots and started my own advisory and investment company about a decade ago. I focus on technology, communication, financial services, retail and sustainability; all with a growth perspective on mind.

Why did you become a mentor? How did you come up with the idea of becoming a mentor?

Along my own entrepreneurial journey, I realized that you’re fairly isolated from everyone else as a business leader and there’s profound difficulty in finding an objective third party who can function as a sounding board. I was lucky enough to have a strong support network that would provide me with much needed advice and perspective. Even so, I would have benefited greatly from having a more experienced, independent mentor who had walked my path before. A few years ago, I wanted to give back and share my own experience with those who might benefit from it.

The profiles of your mentees were very different. Why these choices?

As a professional advisor and an investor into start-ups, I have always thoroughly enjoyed helping business leaders succeed. Regardless of the sector, I decided to support my past mentees as I understood their struggles, whether it was to fully realize the implications of becoming a business leader, to identify skill gaps and design a development plan to build them, to discuss the nature of managing teams, or to better understand their company’s ecosystem and stakeholders. Having been there myself, I felt I was well-matched to mentor them.

What does the Business Mentoring Luxembourg programme bring to you?

Being a mentor of the BML programme is immensely rewarding. First of all, you’re supporting someone who’s in need of guidance and advice to weather a difficult period in their professional life. Secondly, the programme contributed to my own development as a mentor by providing insightful training and knowledge. Lastly, you have the opportunity to interact with your fellow mentors in the programme, share experiences as peers and learn from them.

Recommended Reading

This is an ever-evolving list. Please do come back later to see if anything interesting popped up!



  • Ries – The Lean Startup
  • Maurya – Running Lean
  • Maurya – Scaling Lean
  • Osterwalder, Pigneur – Business Model Generation
  • Levitt, Dubner – Think Like a Freak


  • Taleb – The Black Swan series
  • Ante – Creative Capital: George Doriot and the Birth of Venture Capital
  • Rose – Angel Investing
  • Hargreaves – How to Become a Business Angel

Personal Development

  • Brimm – Global Cosmopolitans
  • Brown – The Independent Director
  • Dilts – From Coach to Awakener
  • Hofstede, Hofstede – Cultures and Organizations
  • Levitt, Dubner – Freakonomics
  • Pfeffer – Power
  • Tan – Search Inside Yourself

Everything You Should Have Read Already

  • Stewart – In Pursuit of the Unknown
  • Watson, Gann, Witkowski – The Annotated and Illustrated Double Helix
  • Bryson – A Short History of Nearly Everything
  • Eagleman – Incognito: The Secret Lives of the Brain
  • McRaney – You Are Not So Smart
  • Macauley – The Way Things Work Now
  • Harris – Big Questions from Little People
  • Hawking – A Brief History of Time

Just For Fun

  • Adams – The Hitchhiker’s Guide to the Galaxy series
  • Asimov – Foundation series
  • Carroll – Alice’s Adventures in Wonderland and Through the Looking-Glass
  • Corey – The Expanse series
  • Herbert – Dune series
  • Pratchett – Discworld series
  • Tolkien – The Lord of the Rings series

The Mystic Monkeys’ View on Life, the Universe and Everything Else

SANZARU Group Logo
The SANZARU logo, representing the four mystic monkeys in abstract form

Welcome to our blog!

So, what’s in a name? Our name is derived from the Japanese philosophical proverb of the mystic monkeys, who teach a sensible approach to life by behaving with propriety in words and deeds. In its most verbose form, the principles are: “look not at what is contrary to propriety; listen not to what is contrary to propriety; speak not what is contrary to propriety; make no movement which is contrary to propriety”. If you’re interested, feel free to read more about them on