21 Aug How European VC can Professionalise the Startup Game
How has VC evolved and what does it mean for investors?
Europe’s VC Scene Isn’t About Luck Anymore—It’s About Playbooks
Over the past 10-15 years, Europe’s startup ecosystem has experienced a significant transformation. Fifteen years ago, founders and VCs often depended on theoretical strategies and a bit of luck—there were few mentors, no established playbooks, and each startup was basically starting from scratch. Today, that has changed. Europe’s startup community has collectively developed a knowledge base of best practices. While luck still plays a big role, it is now supported by proven playbooks for SaaS, biotech, marketplaces, and deeptech. A generation of successful entrepreneurs is now mentoring the next, and VCs have refined data-driven strategies to greatly increase the chances of success.
Europe’s tech champions like Klarna, Revolut, Spotify, and Zalando have spun off over 215 new ventures, acting as “founder factories” that spread entrepreneurial know-how. In short, building a startup is no longer a mystical quest. Founders can tap into established playbooks and experienced advisors, and VCs have honed data-driven strategies to support portfolio companies. This changes everything.
How VC Is Professionalising, Just Like Private Equity
It’s fascinating to note how venture capital itself has evolved in a similar way to private equity’s maturation. Decades ago, PE firms were opportunistic financiers with no explicit playbook for improving companies. By the late 1990s, they had developed a systematic value-creation playbook centered on driving revenue growth, expanding EBITDA margins, de-gearing and achieving multiple expansion. This approach professionalised the industry, turning it into a consistent money-making machine.
Venture capital in Europe has followed a comparable path. Where earlier VCs simply placed bets on a few promising founders across promising trends and hoped for the best, the best VCs today have their own playbooks for guiding startups. But there are fundamental differences. Unlike PE, which acquires mature companies and drives value through leverage and financial engineering, VC operates at a much earlier stage. The focus is not on restructuring, but on making founders extremely capable: showing them the methods used by the greatest entrepreneurs, helping them assemble strong teams, and, above all, supporting them in finding the right go-to-market strategy. Vision, invention, and the path to product–market fit remain ‘black magic’—the exclusive responsibility of founders because they depend on intuition, insight, and spidey-sense, not on the value-creation frameworks mastered by VCsor seasoned board members. Due to the early innings of that journey, risk is higher, outcomes follow a power-law distribution, and the dynamics are fundamentally different from PE. Still, the lesson holds: from Product Market Fit onwards, systematic, playbook-driven approaches to value creation work —adapted to early-stage realities. They are professionalising European venture and reducing risk. Startup building is now a less chaotic, more structured process and both European VCs and founders increasingly understand how to play the game to win.
The Rise of Europe’s Resilient, Capital-Efficient Startups
With experience and playbooks in hand, Europe is now producing a steady stream of resilient companies. In the past decade, the number of European software startups has grown fivefold, and the region raised over $425 billion in venture funding—ten times the total of the previous decade. Today, Europe is home to more than 280 tech companies generating each over €100 million in annual recurring revenues, a level of business success that was rare here in earlier eras (and over 1000 generating over €25m in revenues). In fact, Europe is now creating more new startups than the US, demonstrating how robust the pipeline has become.
Crucially, European startups have learned to thrive through capital efficiency and sustainable growth. With historically less capital available, a considerable weakness of our ecosystem, founders had to do more with less—emphasizing revenue, customer value, and early profitability. While this might mean European companies grow slower than their U.S. counterparts, they often build superior technology and products while remaining disciplined in spending. This hallmark of capital efficiency has made Europe’s startups resilient, positioning them to reach profitability more reliably. The upside? Raising too much money has ruined the bigger part of the 1250 unicorns minted during the 2020-2021 period. While Europe paid a price, it has been far smaller than the US as a result of our “conservatism”. The downside? Weaker brand recognition and less confidence in dominating their space, which means we still have work to do. Whether this stands to change in the age of AI is to be seen.
Europe’s Exit Market: The Power of Predictable Small-Cap Success
While the aspiration of achieving unicorn outcomes remains a big part of the venture capital narrative (Europe had six €1B+ acquisitions and 0 IPOs in 2024 and YTD 2025), Europe’s small-cap tech exit market has become substantial. The region is now delivering close to 1,000 exits annually in the €100 million – €500 million range, roughly the same size as the U.S. market with a significantly lower proportion of capital allocated (capital efficiency again).
The available data unequivocally demonstrates a higher probability and greater volume of exits within this range in Europe. This segment exhibits remarkable resilience, supported by a diversified and highly active buyer pool, particularly comprising corporates and mid-market private equity funds. This ensures consistent liquidity pathways, making the €100 million to €500 million segment not reliant on IPOs or large U.S. tech buyers for its liquidity. Conversely, the pursuit of €1 billion-plus exits faces significant structural headwinds, including challenges in public market liquidity and underdeveloped large-deal M&A. This gap makes it inherently more difficult to achieve U.S.-style mega-valuations for European companies. Therefore, by understanding and leveraging these market realities, investors can optimise their portfolio construction for more predictable and consistent returns.
Lower Risk, Higher Returns: Why Europe’s Discipline Pays Off
Thanks to these playbooks, support systems and a matured small-cap exit market, the risk of venture investing in Europe has decreased. Founders are no longer flying blind, and investors can better predict and shape outcomes than before.
Nevertheless, venture returns tend to fluctuate with the broader funding cycle. When too much money floods the system (e.g., the late 2010s boom), we often see returns compress as capital is deployed into overhyped deals at extreme valuations. When the bubble deflates and funding tightens (as it did in 2022–2024), the excesses are washed out. Interestingly, despite Europe’s reputation for caution, its venture funds have slightly outperformed U.S. venture funds slightly over the past 5, 10, and even 20 years in net annual returns. This counterintuitive result stems from Europe’s discipline combined with the broad small-cap exit market.
With a more sober market, strong returns are coming back. Venture investing is resetting to fundamentals: reasonable valuations and a focus on real metrics, which plays to Europe’s strengths. So while the risk in backing European startups is lower today, the potential returns may actually be rising, especially for those investors who remained disciplined.
The Contrarian Advantage: Why Europe’s Seed Funds Are Built to Win
All these developments suggest that in Europe, it is increasingly possible to run early-stage (seed) funds that are structurally and consistently profitable. The recipe is simple: choose the right founders riding the good trends, provide them with the rich support ecosystem now available (mentors, playbooks, networks), and add value at each step of their growth. We now have all the ingredients—talent, knowledge, capital, efficiency—to nurture startups from idea to exit in a repeatable way.
The key to making this strategy work is twofold: (1) set fund size accordingly, in other words, on the basis of venture fund math, small funds up to €50m stand to have the highest chance of delivering consistent performance (a fund returner here means 20% ownership x 250m exit) (2) investors must remain disciplined on entry valuations and avoid the herd mentality. Chasing the “hottest” sectors and its shiniest startup stars often leads to overpaying and poor returns. By contrast, adopting a somewhat contrarian approach—backing teams in sectors that aren’t hot, at sensible seed valuations in capital efficient businesses—hasproven to be a reliable source of returns. It might sound counter-intuitive, but paying fair prices for undiscovered companies and helping them grow carefully is exactly what builds a sustainable portfolio.
In conclusion, the nature of venture in Europe has fundamentally changed. It’s no longer a casino game; it is a craft. With lower risks and smarter playbooks, European founders and VCs are now positioned to consistently create and capture value. This success isn’t solely dependent on the rare mega-exit; it’s built on a robust, predictable small-cap market that provides consistent liquidity and returns. Europe’s startup ecosystem has come of age, and the best is yet to come.
About the Author:
Jérôme Wittamer is the Managing Partner at Expon Capital, a venture firm dedicated to building resilient companies in the European market. Having actively participated in the European tech ecosystem for over 20 years, he has witnessed its profound evolution from a landscape of hopeful ventures into a mature market with established best practices. This experience has shaped his belief that the next generation of European success stories will be built on a foundation of operational discipline and structured playbooks.
Concluding Statement
At Expon Capital, we are committed to this new craft, building our strategy around these principles to support the next wave of successful European ventures.
Sources: European ecosystem data from McKinsey & Atomico ; venture funding and returns from Crunchbase/Cambridge Associates ; M&A data from Mind the Bridge ; private equity playbook from GS AM ; analysis of cheap capital era ; European Small-Cap Growth Equity, A Differentiated Opportunity in a Reset Global Landscape, Finch Capital, May 2025.
1. Atomico / Financial Times
Europe raised $426 billion in venture funding over the past decade, a tenfold jump from the prior decade. This source also highlights that Europe now has around 35,000 early-stage startups, the most of any region.
URL: https://www.ft.com/content/ce079bb8-f59f-43f9-965b-cbcd410cf625
2. Wired
Europe now supports a cohort of over 507 “scale-ups” generating more than $100 million in annual revenue, demonstrating the region’s maturing ecosystem.
URL: https://www.wired.com/story/europe-is-the-new-palo-alto/
3. Mind the Bridge
U.S. companies account for approximately 27% of European startup acquisition deals, signaling strong exit demand from across the Atlantic.
URL: https://mindthebridge.com/startup-ma-worldwide/
4. Sifted (Invest Europe / Cambridge Associates data)
European VC funds delivered 20.77% IRR over 10 years versus North America’s 18.18%, and 16.57% over 15 years versus North America’s 16.09%. However, over a 20-year period, North American VC slightly outpaced Europe: 13.03% vs. 12.87%, respectively.
URL: https://sifted.eu/articles/european-vc-irr-2024
5. Sifted (Invest Europe report)
Since 2002, European VCs have generated 12.65% net annual return compared to the U.S. at 12.25%. Over the decade up to 2022, Europe produced 23.07% IRR vs. 21.15%, and for the five years prior to 2022, Europe saw 31.44% vs. 25.20%. Europe also posted slightly superior multiple-on-invested-capital (MOIC) at 2.4x vs. 2.11x for the U.S.
URL:https://sifted.eu/articles/european-vcs-get-better-returns-than-us-counterparts-according-to-report
6. Cambridge Associates / Investopedia (Private Investments & PE)
Private investments (both venture and private equity) have historically outperformed public market indices like the Russell 3000 over long periods—Cambridge Associates data confirms this structural edge.
URL: https://www.cambridgeassociates.com/en-eu/insight/the-15-percent-frontier/
Supplemental (Investopedia): PE returned ~10.48% annually (2000–2020) versus ~6–7% for public indices.
URL: https://www.investopedia.com/ask/answers/040615/how-do-returns-private-equity-investments-compare-returns-other-types-investments.asp