Together with the Technical University of Munich, Speedinvest The survey surveyed the views of 437 individual investors across Europe. The results reveal how venture capitalists approach startup investments.
When it comes to deciding whether or not to invest, the startup's management team is the deciding factor. This is stated by 49 percent of the investors surveyed. According to the study, 42 percent of investors make a gut decision about whether to invest during their first meeting with a management team.
Key figures less important
When it comes to finances, numbers are clearly not everything. As many as 13 percent of venture capitalists surveyed stated that they do not analyze financial metrics at all when making investment decisions. When they do consider numbers, three factors determine company valuation: the ratio of valuation to revenue or profit (75 percent), the ratio of company profit to invested capital (49 percent), and the expected return (32 percent).
Investors rely on their network
The Speedinvest study also shows that the industry continues to be dominated by networking. According to investors, the most important sources for learning about startup deals are proactively self-generated funds (29 percent), recommendations from their professional network (28 percent), and introductions from other venture capital firms or business angels (21 percent).
European vs American ecosystem
Speedinvest also analyzed investors' views of the European ecosystem compared to its US counterpart. Seventy percent of the investors surveyed cited Europe's greatest strength as its education system and academic institutions. Talent (65 percent) and technical know-how (61 percent) were also cited as European advantages.
However, the majority of venture capitalists (87 percent) also see Europe as a highly fragmented ecosystem that relies heavily on regional centers. This makes it difficult to maneuver investments. The majority of investors cite cultural differences (70 percent), the maturity of local ecosystems (68 percent), and the regulatory environment (65 percent) as the main reasons for this fragmentation and as a current challenge.
Nevertheless, the complexity of European markets does not appear to pose a barrier for international investors. A full 76 percent of VCs report an influx of US investors into Europe. Andreas Schwarzenbrunner, who supported the research project at Speedinvest said:
"Despite its relatively young ecosystem, Europe offers enormous potential. The continent attracts with new investment opportunities, passionate founders, and access to talented professionals from renowned technical universities. Proximity to low-cost engineers is also a major advantage. Europe promises market leadership, a high quality of life, and attractive investment opportunities for US and international investors."
