Unease In European Tech Sector

Mark Scott reported recently in The New York Times that, “The focus at Deliveroo [a food delivery start-up with headquarters in London] is symptomatic of a change across many European start-ups. Just as in Silicon Valley, where a number of privately held tech companies have been stung by lower valuations and investor questions about their sustainability, that same unease has now reached Europe’s tech community, in a sign that a move away from soaring boom times in start-ups is going global.

“Driving the pullback are some of the same forces that have caused a change in Silicon Valley’s start-up scene. Tech stocks are gyrating because of fears of a global economic slowdown — exacerbated in Europe by the region’s migrant crisis and persistent financial problems. Valuations of some start-ups worldwide got ahead of themselves. As a result, venture capitalists in Europe and farther afield are becoming more cautious about funding local start-ups that do not have proven business ideas.

“‘When Silicon Valley sneezes, the rest of the world catches a cold,’ said Fred Destin, a partner at the London office of Accel Partners, a venture capital firm. ‘It’s only a matter of time before Europe faces the same issues that we’re seeing on the West Coast.'”

Mr. Scott noted that, “The chill among European start-ups is not as severe as in Silicon Valley, where companies like the storage start-up Dropbox have been marked down in value by mutual fund companies, and other start-ups have had to raise money at lower values than previously, in what are known as down rounds.

That’s because the European start-up scene is significantly smaller than that of Silicon Valley.”

The Times article added that: “Still, as American investor sentiment spreads across the Atlantic, European venture capitalists said they were warning start-ups that new capital would be tougher to come by than in previous years. And for start-ups that already had raised money, they cautioned, how entrepreneurs spend existing funds will also come under greater scrutiny.”

This entry was posted in Start-up Company Law. Bookmark the permalink. Both comments and trackbacks are currently closed.