Giuseppe Zocco, Index Ventures¹¹

How does the environment and ecosystem for entrepreneurs in Europe (including the regulatory environment) compare to other geographies, specifically the United States?

The last year has, in a big way, changed the perception of Europe as a region. We are no longer hearing the perennial question, “Where is your billion-dollar tech company?” An amazing 12-month period was kicked off last October when Criteo showed the world what Europe can do, with the largest-ever European IPO [initial public offering] on the NASDAQ [stock exchange], which was quickly followed by Just Eat, King, Zendesk, Zoopla, Supercell, Rocket and Zalando, all multibillion-dollar companies born in London, Helsinki, Paris, Copenhagen and Berlin. In addition to these IPOs, we’ve seen the acquisitions of Minecraft and Cambridge Silicon Radio (by Microsoft and Qualcomm, respectively) for billion-dollar-plus valuations. We’re lucky enough to have backed four of these companies, and they exemplified what we have always known at Index – that great companies can be built anywhere.

Europe’s technology scene has for far too long been stifled by constant comparisons with the Valley. Today we’d argue that in a networked global economy, with 3 billion people online, talking in terms of “Europe versus Silicon Valley” is now an obsolete comparison. In today’s start-up world, it’s all about the network and the connection between hubs like London, Paris, New York, Tel Aviv, Berlin and Stockholm, to name a few. The mission-driven orientation, which has always been true of the great entrepreneurs in Silicon Valley, is now a worldwide phenomenon.

Alongside this fresh thinking, the entrepreneurial climate in Europe is improving. Governments across Europe are increasingly attuned to the transformative power of innovation and are now open-minded and accommodating to start-ups, in a way we haven’t seen before. Governments themselves have decided that supporting technology is a primary strategic goal. Finland and the UK are great examples of this new attitude towards entrepreneurship. Over the past few years, London has made huge strides in developing itself as a key European tech hub, as has Israel and, of course, Estonia, which arguably has been the most pioneering of all.

Is it harder to disrupt industries in Europe?

We are seeing many fantastic European entrepreneurs disrupting their traditional industries. For example, in the financial services industry, one could point at Funding Circle, which has completely changed the way money can be lent to small businesses, or SavingGlobal, which is creating a marketplace for savings products. It’s easy to imagine that eventually every sector of the current banking and financial system, from insurance to wealth management, will be completely changed by the disruptive impact of technology, especially by new, tech-based online services.

While the incumbent banks might be worried about these trends, at Index we consider the fact that an industry is ripe for disruption to be a great thing. When this happens, it means that millions of consumers of a product or service will soon have access to improvements that will help them save time, save money, be more productive and generally live better lives.

Europe has lots of great companies in many sectors that will be disrupted by new, more innovative players. The good thing is that many of these players will come from Europe itself. So this is not so much a comparison between nations (US versus Europe), but, rather, a battle between generations, which is a healthy innovative trend for many industries in Europe, Asia and America alike.

Within our portfolio, we are seeing great successes on both sides of the Atlantic. Of the 11 Index-supported companies valued at over $1 billion in the last 12 months, five were European-born: Criteo, Supercell, Just Eat, King and Zendesk.

Index was founded based on the thesis of bringing the Silicon Valley model of venture capital to Europe. How have you seen that evolve since you started?

When we founded Index Ventures 18 years ago, the start-up scene was nascent across Europe, but we were confident that entrepreneurship was about to explode. For us, as entrepreneurs and builders of our own firm, it was natural to devote a great deal of time and energy to help create a start-up ecosystem in Europe from the ground up. When we backed the first wave of European entrepreneurs who successfully built global leaders, like Betfair, Skype and MySQL, the ecosystem was still in its infancy. The great progress made by Europe in recent years has allowed companies to emerge as global players in a short period of time, and to achieve global leadership in their sector from a European base.

Silicon Valley still is, and will probably remain for our lifetime, the most connected tech-ecosystem hub in the world. However, London, Berlin, Tel Aviv, Stockholm, Helsinki and Paris have all become serious hubs in the global entrepreneurial network. Over the past decade, Europe and Israel have been quietly building the next generation of tech giants, and many have already emerged as successful public companies. Over the past 10 years, we have seen a huge increase in the number of investors prepared to devote their attention and capital to Europe, from angel investors and micro-VCs to crowdfunding and even public investors. Last week, we saw the news that London deployed a record £1 billion in venture capital in the first nine months of 2014, so it’s increasingly clear that the European ecosystem is thriving, putting resources into the hands of those who can use them. That also means that great venture investors have to bring much more than capital to the table; in order to find partners in the best and most exciting entrepreneurs, European VCs have to be able to help and nurture the growth of the businesses they have backed.

Our founding thesis at Index was to bring the Silicon Valley model of venture investing and adapt it to Europe. A central part of this approach is rooted in providing full-service support to our entrepreneurs to help them succeed. We take being a “full-service” investor very seriously. It is part of our culture and our practice to go the extra mile and to use our network and our resources to support our companies wherever they may need it.

Some of the greatest and most interesting companies and teams in the world continue to be based in San Francisco and in the Valley. That’s why we have always been active there and opened a San Francisco office a few years ago. At the same time, we were founded on the premise that great ideas and great entrepreneurs can come from anywhere, and, therefore, continue to believe that some of the most disruptive business models will continue to emerge from Europe. The recent success stories of European global leaders have made this increasingly clear to the world. The opportunity is now global. This is why being in London and Geneva, as well as San Francisco, gives us a powerful platform to support the most innovative global entrepreneurs regardless of their geographic base.

Where are the major areas of disruption that Index is looking at over the next decade?

We are in an age of disruption. We believe that almost every aspect of human activity can and will be transformed by new technologies driven by great entrepreneurial energy and passion. At Index, we feel that we are just at the very start of this new era.

In June 2014, we launched a new €400 million fund, and we are excited to expand our support for creating new innovative global leaders, especially around four key thematic areas: mobile consumer, enterprise, networks and financial services. In these sectors, significant innovations are happening at incredible speed, from AI and robotics, to bitcoin and low-cost consumer investment platforms, to the IoT and the growth of marketplaces that are disrupting the way consumers and merchants transact in so many sectors. In addition, there are the many creative ways in which visionary entrepreneurs are leveraging the cloud, big data, security and mobile technologies to transform almost every aspect of our daily lives.

What advice would you give European governments and regulators looking to leverage the upside of disruptive start-ups?

Governments in Europe need to encourage entrepreneurs with global ambitions to establish and grow their companies in their home country, by creating the conditions that make it easy for them to do so. Naturally, being open to new business models and welcoming companies like Uber, Airbnb and other global innovators is critical to being a place that truly welcomes innovation. Equally important for European political leaders is to do whatever they can to attract well-educated, missionary entrepreneurs and to invest in making European cities functional, liveable and exciting places for the young people who will build the companies of the future.

Some countries like the UK, Finland and Estonia have made great progress in this area by encouraging the development of entrepreneurial hubs through favourable policies, such as providing tax and other incentives for the creation of start-ups or facilitating the availability of visas for people with the skills required by the tech sectors. Of all the technology clusters in Europe, London is currently the most advanced and has recently cemented its leadership position with two major public listings of innovative, venture-backed companies. The first was King, the London-based, global mobile game leader (the developer of Candy-Crush Saga) that listed on the NYSE [New York Stock Exchange] and is capitalized at approximately $4 billion. The second, Just Eat, a global leader in online and mobile food ordering, soon followed as the first company to list on the newly-formed High Growth Segment of the London Stock Exchange, where it was valued at £1.5 billion.

From my perspective, other European countries need to follow this lead and bet their future on helping, and broadly supporting, entrepreneurship. Prioritizing such policies is critically important in this time of painfully high youth unemployment, especially in parts of mainland Europe like Spain, Italy and France. Financing early-stage innovation helps create economic growth. Providing building blocks for start-ups, for example in the form of mentorships and financing, inevitably leads to job creation. Across the Index network of European companies, there are currently over 2,000 open positions.