Europe’s resilience and long-term prospects in the face of a global investment slowdown may explain why limited partners are now favoring transatlantic venture capital firms. Giant Ventures raised two new funds totaling $250 million in January that will invest in startups on both sides of the Atlantic. Today, TechCrunch exclusively learned that Frontline Ventures has also raised $200 million through two funds, named Frontline Growth and Frontline Seed.
Frontline has historically invested in Europe and North America, and its new fund will continue to follow this strategy, betting on B2B software companies. The new seed fund will benefit European companies, while the growth fund will focus on U.S. startups.
The venture capital firm’s logic is that when U.S. scale-up companies expand across the Atlantic, their odds of success are much greater. Brennan O’Donnell, who will co-lead Frontline Growth with partner Stephen McIntyre, said in a note: “While Europe is a traditionally undervalued market , but Europe accounts for more than 30% of the global revenue of the best-performing B2B software companies in IPOs.” stated.
“Traditionally undervalued” is a popular description of the European venture capital landscape, but once you stop comparing recent investment trends to the boom years of 2021 and early 2022, it’s not as bad as the headlines suggest. Europe, for example, has seen a report from law firm Orrick show that venture capital investment has slowed significantly over the past few years, but new startups on the continent still raised more money last year than in 2019. In fact, Europe is the only major region where investment levels remain above pre-pandemic standards, while Asia and North America both perform poorly by this measure.
O’Donnell and his partners on the frontline have been outspoken about the value of Europe for some time and have even confirmed it through some of their own research. Frontline essentially wants to ensure that its U.S. companies don’t waste money by not expanding to Europe when they should, and according to O’Donnell, Frontline’s goal is to offer its expertise to startups when they’re ready knowledge to help them overcome difficulties. expansion.
Expansion roadmap
O’Donnell told TechCrunch that when helping portfolio companies expand into another market, Frontline focuses on four areas: timing, go-to-market strategy, talent, and organizational design and location.
This is in order of importance, O’Donnell said, and a company’s geography should be a derivative of the first three. “Ultimately, location depends on where your customers are and where the talent base you need to effectively support those customers is.”
Frontline has put the framework into practice over the past few years, supporting portfolio companies such as HR software company Lattice and compliance platform Vanta as they expand into Europe.
“It’s not obvious when the lattice expands,” O’Donnell explains. While the company put its plans into action during the pandemic, when people still weren’t actively boarding flights, there was also a sense that the 2020 decline wouldn’t last, he said, adding that HR technology has Some rides. A few years later, this decision proved to be “very successful.”
One of the pitfalls Frontline warns against is “success amnesia”: just because a company has achieved a certain level of success in the United States, it doesn’t mean it will do well in Europe without a careful strategy.
“Thanks to Frontline’s guidance, Vanta is growing as fast as we did in our first 18 months in Europe,” said Christina Cacioppo, Vanta co-founder and CEO. “Thanks to Brennan, Stephen and the Frontline team, we have tripled our customer base, quadrupled our team and solidified Vanta’s position as a global market leader.”
In addition to partners and offices in London, Dublin, Palo Alto and New York City, Frontline has established a community of senior executives across Europe and the Middle East to form a network that its portfolio companies can leverage. “Over the past few years, we have built a community for 200-250 vice presidents and general managers in EMEA and hold regular events.”
Speaking about the company’s current portfolio, O’Donnell said he expects an initial public offering within the next 18 months. Of course, seeded bets take longer to get to the exit stage, but Frontline is also keen to help them get from one stage to the next.
Speaking of Frontline Seed, O’Donnell noted that the company “has a particularly strong track record of helping companies raise Series A rounds.” Considering that pre-seed and seed investments are not slowing down as much as later-stage, avoiding this bottleneck could be valuable for European startups looking to scale across the Atlantic, and perhaps even IPO candidates.
