Are European Investors an Easier Sell than U.S. Investors for Startup Companies
By Susan Schreter - Take Command

Q.   I recently left a big company to start a company to develop energy- saving technologies for businesses and eventually the home market. I have considerable engineering expertise in this area. Initially, I think my technology will be more appealing in Europe because European businesses tend to pay greater attention to energy conservation. Should I go to Europe for investment capital? Do any U.S. venture funds have offices in Europe?

A.   We live in a global marketplace these days. I'm reminded of this each time I call a major airline to change a reservation.

It's not unreasonable for an ambitious, world-view entrepreneur like you to think venture fund investors are open-minded to investing in promising opportunities wherever they may be. Many funds do. A short list of US-based venture funds that have European offices includes Summit Partners, Atlas Ventures, INVESCO Private Capital and Advent International. You'll also find that many of these funds also operate offices in South America and Asia.

While this seems like a promising start to your quest for startup capital, here are a few tips on targeting potential investors.

First, the starting point for venture solicitation planning should always be matching the stage of your company to investor interests. You are now at a raw startup or "seed" stage. No matter how terrific your deal, venture funds that describe their investment activities as "early stage" or "expansion stage" just won't open a business plan from a seed stage company.

Second, venture funds prefer to invest in areas where they have industry expertise. This means you will have a better chance attracting attention if the fund's Web site lists a desire to read business plans in clean tech, energy, environmental technologies. These two factors will matter much more to potential investors than your targeted geographic market for your technology.

Here are some more time-saving pointers:

  • Venture investors love to get in on the ground floor of emerging markets where customers are just waking up to the demand for improved technologies. One of these markets is alternative energy solutions. Don't assume you have to trek to Europe to find investors who are willing to back energy saving technologies. Nth Power is one fund that is leading the U.S. venture community's investments in this area. Also check out Expansion Capital Partners.
  • If you really want to pursue venture funds with European offices, visit the European Private Equity and Venture Capital Association's Web site at www.evca.com. Click on "member search" to identify a list of funds that may have an interest in energy businesses. A word of caution, however. Mixed in with the EVCA's list of active funds are associate organization members who are looking for new legal clients, not new investment opportunities.
  • If targeted investors all tell you to come back "once your company has gained some traction" consider raising a small first round of funding with local individuals or "angel" investors. In general, the younger the company, the tougher it is for entrepreneurs to attract what I call distance capital. Investors reason that over-worked startup entrepreneurs benefit from strategic mentoring and moral support. Once you can demonstrate some progress in product development, then you will be in a better position to appeal to a larger number of funds that invest in early stage companies than startup seed stage companies.
  • Lastly, make sure the technology you are developing is original to your new company. Investors may challenge you to prove that your former employer has no intellectual property rights claims to your innovations. You can do it!

Susan Schreter is an expert in venture capital and buyout market financings and is the managing editor of TakeCommand, a service organization for startup and emerging growth entrepreneurs.