Google Ventures Enters European Venture Capital Market

By August 04, 2014

The recently-announced advent of Google Ventures Europe is set to bring extra resources to the European innovation ecosystem but the firm will need to address the European market as a whole if it wants to make the most of the opportunities available.

The EY barometer reported that in 2013 venture capital investments in the United States amounted to $33 billion, compared with $7.4 billion in Europe. While this figure represented a 19% rise in the volume of European deals versus 2012, the ‘Old Continent’ is clearly lagging well behind. Now the recent announcement that Google Ventures, a venture capital firm belonging to Google which was launched in 2009, is coming to Europe and will open an office in London, could have a significant impact on the innovation ecosystem in Europe, but it remains to be seen whether the new entrant will be able to take advantage of opportunities across the continent.

New player in the European ecosystem

Bernard-Louis Roques, General Partner at Paris-based Truffle Capital, an independent European private equity firm originally set up to invest in spin-offs from companies active in, among other fields, the Information Technologies sector, believes that the arrival of Google Ventures Europe will have a positive impact since “there’s certainly a shortage of finance, so companies go and look for it abroad or sell off the business. It’s encouraging that Google thinks Europe has a strong role to play in the innovation ecosystem.” Google Ventures has no ambitions to come in and shake up the venture capital business in Europe, but intends to invest in companies that offer new innovation opportunities. In the company’s official Press Release, Google Ventures cites the examples of successful European startups such as SoundCloud, an online audio distribution platform based in Berlin, and digital music service Spotify, which demonstrate the ″enormous potential″ of Europe’s startup scene.  Meanwhile Roques sees Google’s strategy as “a way of having a presence in the native European ecosystem and being perceived as a local player.”

Only UK or the wider Europe to benefit?

Google Ventures Europe will begin with startup capital of $100 million, which seems rather a limited budget if Google is planning to seek investments across Europe as a whole. In fact Google Ventures is going to open its European office in East London close to the UK’s ‘Silicon Roundabout’. The Truffle Capital director points out that many US investment funds that are interested in Europe very often go to the UK, where there are both strong geographical links with the US and a highly favourable tax regime. As far as Bernard-Louis Roques is concerned it would not really make sense to set up an office in Paris as there would be no tax advantages. Nevertheless the fear must be that as Google Ventures Europe will be based in London, the company might neglect the rest of the continent.

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