Venture funding in Europe is declining faster than in the US
Europe’s venture capital decline was initially buried under its own numbers. Due to a particularly strong funding environment in the region this January, the pullback was masked in Q1 totals. The pace of the decline was notable, with the region seeing $13 billion invested in Jan.
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My two cents: Europeans techies are used to the concept of bootstrapping. In the U.S. we've glamorized the idea of raising massive amounts of funding even if it's not necessary. Bootstrapping in Europe is much more common, accepted and preferred.
I tend to see an even mix in Europe, I know a lot of founders who've taken investment but plenty who are bootstrapped too. The thing with the bootstrapped people is they're split 50:50 between those:
Some fun examples on the diabolical terms: I know a European founder who absolutely had to raise for their business to succeed, and they gave up 40% of the company in a seed round. I also know someone who's startup founder had lost their majority stake (like they had around 35% left) before they'd even taken a Series A...and then that round was almost impossible because later investor were very wary.
Anyway, the EU has never been a good place to raise money, the investors just have a different risk appetite and are somewhat predatory, so I agree that founders tend to prefer to go it alone and try and bootstrap for much longer than US counterparts. I don't think it's a true preference for half of them though, they'd probably love the convenience of raising a decent round on US-style terms.
Last thought... in my experience bootstrapping doesn't necessarily make founders better founders (as you sometimes hear), but it does make them laser-focused on profitability really early on which is not always bad thing. Sometimes it is though, in a new/emerging space then capturing market share is considerably more important in the long run than near-term profits...so that gives US companies an edge.
Ironically, here's a recent take from a European indie founder on why they turned down €250K https://www.indiehackers.com/post/we-rejected-250-000-in-seed-round-30f82921fc
Yes, this is one of those main problem. Many VC companies will tell you that they will bring vetted employees and top position leadership to join your company after investment.
These new employees from top to down are nothing but sleeper cell just waiting for perfect to time to kick you out from your own company when needed by VCs.
These maybe because of two reasons.
New strict privacy laws and restrictions making investors rethink where they want to risk their money in such environment or not.
Because most of these investors invest money to get hyper growth and returns. And hyper growth need exploitations in multiple ways which now can be risky for medium level investors with limited fund.
There is reason why Google and Facebook keep paying fines in Europe Union instead of just following laws. This is too unaffordable for medium level companies.
Many people just want to hustle and make money to afford things but don't want to be millionaire or billionaire. It bring more pressure and takeover your family life.
This is what I think..
These are nice explanations, I'd add something else: Europeans are usually more conservative during a crisis compared to their American counterparts. So I'm not surprised by this stat.
This is mainly due to a disrupted economics around the world because of a prolonged pandemic and the war in the Ukraine. Investors and or individuals who invest in companies are reluctant to do so recently because of the uncertainties, hence why the notable decline. Hope this helps!