Why does Europe have so few start-up-turned-VC operators?

In the ranks of European VCs, there are a lot of former bankers, consultants and, nowadays, founders.

There are not – unlike in the US – so many former operators.

People who have worked in certain functions at startups – from marketing to finance or sales – are still poorly represented in European venture capital, except for high-profile examples such as Sophia Bendz and Cherry (former Global Marketing Director at Spotify) and Carlos Gonzalez-Cadenas at Index (former COO at GoCardless).

The percentage of ex-operating partners at European venture capitals was estimated to be up to 1.8%. On the other hand, former founders account for almost a quarter.

But it looks like that’s about to change. More operators these days you have money to write angel checks, commonly seen as an entry route into VC. Several venture capitals, such as Accel, Atomico and Sequoia, provide European operators with cash to invest through research and angel programs. And some VCs, like Daavet Hinrikus’ Plural, even looking to hire former operators.

Operator call

Micah Smurthwaite, partner at Next47 in London, is Micah Smurthwaite. He is one himself – he was previously in sales at cloud services giant Cloudflare.

“If you’re an entrepreneur, wouldn’t you want someone in the investor seat who knows a lot about growing revenue or expanding an organization? Would that give you a better chance of success?” he says. “That’s why I think an operator-as-investor experience is unique in the European venture ecosystem.”

He recently hired Kate Reznykova, a software engineer who has worked at Apple, eBay and FreeNow. He joined Next47 in December as a senior associate.

She believes that operational experience gives her an “enhanced ability to really understand the technical challenges and opportunities of a founder. This shared experience not only fosters a deeper understanding of the founder’s vision for the product, but also lays the foundation for building a lasting relationship.

Next47 and Plural aren’t the only VCs looking for operators.

Jeremy Cowen, a consultant at executive recruitment firm Kea Consultants, says operators “can be highly additive – not just for cultural reasons or new ideas and networks – but to fundamentally move the needle on access to the most competitive offers”. .

He adds that firms looking to hire outside the small pool of existing investors can “access a much larger (and often untapped) pool of talent by looking at senior operators” — as long as their interview process takes the different background into account.

Paths from former operator to VC

However, not all investors see things that way.

Operators say it can be difficult to break into VC because there are few formal graduate and internship schemes, and firms don’t go to business school campuses to recruit, unlike in larger industries such as private equity or consulting. A lot of jobs are gained through referrals – hard if you don’t already have an industry network.

“From a VC’s perspective, by hiring someone like me, they’re also taking a risk,” says Cleo Sham, who joined VC Stride from London and Paris in 2021. As an operator, she oversaw Uber operations in 45 countries and led a team of 200 as COO at proptech Spotahome.

Some of the risks raised by the VCs Sifted spoke to included concerns about the analytical skills of former operators or – especially if they are hiring someone in a senior role – their ability to learn about how they are evaluated and completed transactions.

Many operators-turned-investors that Sifted spoke to have made some test miles through angel investing.

Morgane Zerath, principal at Crane Venture Partners

“It is it’s a good thing to start making those small investments to see if you want to do it every day and start helping the founders,” says Morgane Zerath, director at VC Crane in London. He was an early hire at cloud email security company Tessian, where he worked in sales.

“I had the codes to know what it takes for a company to succeed or not. My gut told me it was time to help the founders scale,” she says.

Stride’s Sham was taking a year off after her role at Spotahome and started spending more time with the founders she had backed as an angel, which made her want to work in VC.

Once she set her goal, she says the hardest things about her transition to VC were convincing recruiters that she didn’t want an operational role and convincing VCs that she didn’t want a the role of risk partner. The latter is often filled by ex-operators who are between gigs and rarely has the same level of responsibility as a full partner.

“I had to be quite aware of the messages and ask (recruiters) ‘Can you please introduce me to the person on your team who helps the VC?’” she says. “I had to change the conversation and signal to the market that (surgery) was not what I wanted.”

What do operating investors really bring?

So do ex-operators really bring anything special? There are very different opinions. One of the most respected names in the business – American VC Fred Wilson at Union Square Ventures – he is not convinced. “Operators work on one thing all the time. VCs are working on many things at the same time,” he wrote in 2017.

No one has crunched the numbers yet. Although not directly comparable, there is no correlation between prior entrepreneurial experience and VC performance, according to the analysis on CB Insights.

Helena Barman, an investor at Eight Roads Ventures, says her experience at Farfetch was directly applicable to Eight Roads’ investment in online fashion marketplace Otrium, and her knowledge of marketing and analytics gives her an edge in identifying investment opportunities.

But she admits that operators’ in-depth knowledge “fades over time.”

Helena Barman, investor at Eight Roads Ventures
Helena Barman, investor at Eight Roads Ventures

So what does that leave you with? Barman cites the founder’s empathy, an understanding that companies are more than markets and finance – “it’s really about people” – and a network of operators who still practice. “A friend’s phone” is real.

Stride’s Sham says there should even be room for operators to switch between VC and startup roles when they want to refresh their skills.

“There are some people who switch back and forth. There are some who stay in investments forever. I’m not against it either,” she says. “It just depends on what fits my life situation or if I’m really excited to build something.”

The first days of operator-investors in Europe

It is still early days for operational investors in Europe. Next47’s Smurthwaite says he set up a WhatsApp group for investors with similar backgrounds to himself last summer – which now has 18 members.

“I’d like to have more, but it’s a signal of where I think the ecosystem is,” he says.

“But in 10 years, there will be many more scaleups in Europe, many more investors or operators who have started writing angel checks and many other operators who will think more about risk because they have some experience in angel investments . ”

We have also compiled a list of operating investors in Europe. These are investors who don’t have experience starting their own company, but have worked at a startup or tech company. If there are any additions, please email: (email protected).

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