Sequoia Capital Global Managing Partner Doug Leone speaks onstage during Day 2 of TechCrunch Disrupt SF 2018 at Moscone Center on September 6, 2018 in San Francisco, California.
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LONDON — Some of America’s most successful venture capital firms have been finding it difficult to recruit people to lead their new European outposts, multiple industry sources have told CNBC.
U.S. VC heavyweights including Sequoia Capital, Bessemer Venture Partners, Lightspeed Venture Partners and General Atlantic have all either opened new European offices or started notable expansions in the last 12 months.
Hussein Kanji, co-founder of U.K. venture capital firm Hoxton Ventures, told CNBC that the big U.S. VC firms are finding it “super, super hard” to hire the right people in Europe, adding that there have only been a handful of notable appointments.
“There are few trained general partners in Europe,” he said. A key difference, Kanji said, was U.S. VCs tended to focus on growth whereas European VCs were more likely to prioritize reducing or removing risk.
To some extent, the U.S. VCs are also competing with the likes of SoftBank, which has its Vision Fund headquartered in London. Elsewhere, hedge funds like Tiger Global and Coatue are also expanding in London.
U.S. VC firms want to hire tech investors that they’ve worked with before on start-up boards and they generally don’t like hiring strangers, Kanji said.
Another venture capitalist, who asked to remain anonymous because they work for one of the U.S. funds that has recently expanded to Europe, told CNBC that the “profile of VC” that many of the U.S. funds like is less commonly found within the European space
“It’s not that the talent doesn’t exist, because it clearly does, it’s that the pool of candidates folks are targeting is just more narrow,” they added.
The source said top investors don’t “just tick the box and spend two years at a start-up after the pre-MBA program at McKinsey or Goldman before getting their MBA at Harvard and becoming a VC.”
Recent hires
Last March, Menlo Park, California-headquartered Sequoia hired Luciana Lixandru from Accel to be its first partner in Europe. Accel, which has an office in Palo Alto, California, has backed several companies in Sequoia’s portfolio including Dropbox and Qualtrics.
“I think Sequoia did an incredible job of hiring Luciana,” Blossom Capital co-founder Ophelia Brown told CNBC, adding that there aren’t many VCs in Europe with a “growth-oriented mindset.”
“It’s not easy to find that talent in Europe,” she added. “That’s what the U.S. funds are realizing.”
Elsewhere, Menlo Park-headquartered Lightspeed hired Paul Murphy from early stage VC firm Northzone to lead its European outpost in London. Murphy led Northzone’s investment in virtual event start-up Hopin, which was most recently valued at $7.75 billion despite being less than 2 years old.
Lixandru and Murphy are the only two notable hires in Europe by U.S. VC firms, according to Alex Lim, who left San Francisco VC firm IVP this summer to join London-based Blossom Capital as a managing partner earlier this year.
When the right candidate does come along in Europe, U.S. VCs are willing to pay big premiums, Kanji added. A tech investor at a U.S. VC firm with a London outpost is probably on around $1.5 million a year, another CNBC source claimed, asking to remain anonymous due to the private nature of the discussion.
Nascent industry
The venture capital industry is relatively new in Europe compared with the U.S., where the scene has evolved since the early days of the internet.
That said, Europe’s VC industry has grown substantially in recent years. A decade ago, there were only a handful of venture capital funds in Europe and around 100 tech investors. Fast forward to today and there are thousands of VC professionals in Europe but a large number of those have only been VCs for a few years.
“The European VC ecosystem 10 years ago was very small, so there are relatively few VCs with more than, say, five years’ experience,” Harry Briggs, a venture capitalist at Omers Ventures, told CNBC.
“However, thanks to successes such as Spotify, Adyen, Just Eat and Revolut, there are now far more operators who have experience scaling businesses to thousands of people.”
One such operator is Jambu Palaniappan, who led UberEats internationally before joining Omers Ventures as a managing partner this month.
But people who come from operating roles will need some training, Lim said, and many of the U.S. VC firms will be looking for people who can be “instantly successful.”
Source: CNBC