Part of a venture capitalist’s job is to track macro trends to understand how they may affect investment decisions. These trends may be related to large corporations’ spending habits, such as the shift of technology budgets from IT to marketing departments, or the movement of IT workloads and related budgets from a company’s proprietary data center to the public clouds. Alternatively, some trends are related to business model innovations, like the development of the software-as-a-service (SaaS) subscription model or the open-source software delivery model.
One more rudimentary trend I have been tracking lately is focused on geography.
I believe there’s a pattern emerging in which many European founders build an initial business team and software product in Europe, but then choose New York City as the company’s headquarters to expand go-to-market functions like sales and marketing. For years European entrepreneurs would move to the United States (in particular Silicon Valley) to launch their software startup ideas. But today, increasingly, many software firms are being founded in Europe instead, and teams stay there until the company has achieved a couple million dollars in recurring revenue; this usually coincides with a Series B (or later) financing round. Then, the product team usually stays in the home country, while sales and marketing are built out in New York. A few companies that have roughly followed this pattern include Aircall, Carto and Dataiku.
I believe that there are several core reasons for this. They include access to sales-and-marketing talent in the U.S.; more capital available in Europe; and the increased availability of cheap, easily accessible resources to build a software application.
Indeed, thanks in part to the public cloud providers (namely Amazon Web Services), as well as new software development and collaboration tools, it is becoming much easier to build a cloud-based, SaaS application from anywhere in the world. Further, while historically, there has not been as much access to capital for B2B startups across Europe, that is also changing with a strong and growing network of European investors. These investors range from incubators (eFounders) and seed investors (Point Nine, Dawn Capital) to other early stage groups (Balderton, Index).
So, given all that, you might wonder: Why do European technology companies come to the US at all–and more specifically, why New York?
The pitch is relatively simple: They want to access the large IT and marketing budgets of big, North American companies, as well as strong sales and marketing talent. And New York is preferable to the West Coast in terms of a manageable time zone difference. New York also offers access to the largest financial institutions in the world and top brand-marketing agency talent. Additionally, the growing enterprise DNA in the city lends itself to B2B SaaS startups.
Battery has long backed growth-stage, European technology companies, and helped them expand into the U.S. market. Today, we are announcing our latest investment in a European company with operations in New York. In conjunction with Iconiq (and return backers Dawn Capital, Index Ventures and Newion Investments) we are participating in a $50M series C investment in data-governance provider Collibra*.
Collibra was founded in Brussels, Belgium and as the company rapidly expanded, moved its headquarters to New York City. Today’s financing will help the company further fuel its customer growth worldwide, as Collibra leverages its bi-continental geography to its advantage.
*Denotes a Battery investment. See here for Battery’s full list of all investments and exits.