European Seed Investors Are Flocking To France

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European Seed Investors Are Flocking To France
June 5, 2018

As every entrepreneur will know, securing that first round of seed capital is often the most crucial step in getting any business off the ground.

 

And for their part, seed investors play a crucial role as tech influencers or tastemakers, often backing a trend years before it becomes mainstream.

 

But what do these European tech tastemakers of today think is coming tomorrow?

Source: Mosaic Ventures.

 

AI everywhere

Artificial intelligence is the number one sector that seed investors in Europe are obsessing over, with a whopping 70% saying they’re most excited about what’s going on in the space.

 

Mosaic Ventures, which has backed companies like period-tracking app Clue and crypto wallet Blockchain, this morning published the figures as part of an extensive study into the sentiment of 60 top European seed funders.

 

“I think what’s key about AI is that it’s a horizontal technology wave—AI is a profound enabling technology which is cutting across all sectors which explains why it’s ranked quite so highly,” LocalGlobe’s cofounder and Forbes Midas List alumnus Saul Klein told Forbes about the results of the survey.

 

He joined investors from across 12 European countries who were involved in the Mosaic report, alongside the likes of Seedcamp, Kima Ventures and Hummingbird.

 

Other top performers when it came to areas attracting the most interest from seed investors included software-as-a-service (64%), marketplaces (61%), digital health (54%) and fintech (52%).

 

But it’s not all good news.

Source: Mosaic Ventures.

 

The seed sin bin

Least loved by seed investors, and by a fair margin, is E-commerce.

 

70% of respondents said they would actively avoid the sector in Europe—despite recent successes like Britain’s Farfetch fashion platform last year raising $397 million from China’s JD.com.

 

“E-commerce is hard to defend, it's a reasonably crowded, and the margins are slim, so it's not a sector that we've ever put much emphasis behind,” Alice Bentinck, co-founder of Entrepreneur First, told Forbes.

 

Also surprisingly least-loved by respondents were the much-hyped areas of virtual and augmented reality (VR/AR), which 30% of investors said they’d avoid, Internet of Things (IoT) and crypto (both shunned by 24% of seed investors).

 

“All three are young, emerging technologies where you would always give the same advice—proceed with caution—and I think that’s part of what you’re hearing here,” said Klein.

 

"Investing in these kinds of ‘bleeding edge’ technologies comes with enormous risk," Mosaic's cofounder Simon Levene told Forbes.

 

"They require an investor to have a coherent theory about how the world will take shape over the horizon, and how these revolutionary technologies will help get us there."

 

He added that while Mosaic has made several crypto investments, for VR/AR and IoT there have been few examples of these technologies cutting-through—Pokémon Go and Nest thermostats being standout examples.

 

And just as interesting as what seed investors are investing in, is where they’re investing.

Source: Mosaic Ventures.

 

Viva la French tech

Where are European seed funds looking to increase their resources in over the next 12 months?

 

France (32%) and the U.K. (31%) are the clear winners, leading the pack by a wide margin (the Nordics came third, but chosen by just 15% of respondents).

 

With President Emmanuel Macron’s glitzy overtures to the tech community, along with upcoming policy changes, it’s maybe unsurprising that France is suddenly ranked so highly by investors.

 

“For sure, Emmanuel Macron’s business-friendly rhetoric, and his financial support for the BPI, is helping,” said Levene. “But it is worth noting that French startups still need to navigate France's comparatively unfriendly labour and tax legislation.”

 

Klein added that, at the macro level, France still trails the U.K. in venture funding by a wide margin.

 

“Add the venture funding of France, Germany, Sweden and Israel together, and it doesn't equate to the size of the U.K., so we have to put things in perspective,” he said.

 

Still, with the funding winds blowing in France’s direction, it might not be long before Macron’s mighty French startup ship begins to catch up.

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