For the startup sector, funding, finding customers and attracting talent and experience are often their most critical needs as they look to scale.
Which is why perhaps the most eye-catching news to come out of the European Commission’s Digital Day conference on 10 April was the announcement of VentureEU.
VentureEU is a new ‘fund of funds’ worth €2.1 billion that will spearhead the Commission’s efforts to make it easier for startups across the European Union to access the venture capital funding they need to support their growth.
Following three years of consultation on a proposal originally floated in 2015, VentureEU will manage six funds that will themselves invest in European venture capital funds focused on areas including digital services, medtech, life sciences, and energy. The EU has so far committed €410 million of its own budget to the project, with the remaining €2.1 billion to be raised from private and public investors.
European venture capital funds are on average just one-third of the size of their U.S. counterparts, leading to U.S. startups being able to raise as much as six times the investment secured by their peers in Europe. Over the long term, this disparity - which the European Commission will hope VentureEU can play a role in rebalancing - has meant that the U.S. has more produced more than 100 ‘unicorns’ (startups with valuations of €1 billion or more), versus just 26 founded in Europe.
The VentureEU announcement comes at a potentially difficult time for the European startup community, however. Venture Pulse Q1 2018, the latest edition of a quarterly report on global VC investment trends produced by KPMG, suggests that the number of deals in the UK - historically the leading European market for VC investment - continued to drop as uncertainty over Brexit contributed to investors taking fewer early-stage risks and instead focusing on a smaller number of later-stage deals.
Achieving scale is the core challenge facing every startup, and while access to funding obviously has an important part to play, it is only one part of the equation. You don’t have to look too hard to find examples of seemingly successful startups that took substantial amounts of funding only to fail to build the customer base and profitable business model needed to sustain a long-term viable business.
Collaboration, integration and networking
BBVA firmly believes that just as important as funding - if not even more so - is startups’ ability to connect to the corporates in their industry who can provide a route to scale through collaboration, integration, and networking. These corporates are increasingly realising the need to take decisive action to stop themselves being left behind by digital disruption. Co-innovation with the startups driving that disruption - whether through hackathons, proof-of-concepts, or direct technology integration - is emerging as a mutually beneficial process through which startups gain access to a much larger base for their technology than they would have been able to acquire on their own. Meanwhile, corporates benefit from the ‘halo effect’ of innovation and get close to great ideas and talent.
It’s a model that the fintech sector in particular has started to successfully adopt, with notable interesting collaborations recently between, for example, BBVA and PayKey and BBVA and Change - the winners of last year’s BBVA Open Talent competition.
In fact, BBVA Open Innovation has taken on board feedback from the fintech startups participating in its Open Talent competition over the past ten years, refocusing the structure of the prizes for winning startups to emphasise collaboration rather than funding.
While there is still a financial incentive for startups to enter the world’s biggest fintech competition - BBVA Open Talent - it is only one part of the prize. The bank also offers the winners and more than two dozen dozen runners up, access to an immersion week in the bank, where they can learn from senior executives the drivers that lead to full partnerships between them and BBVA.
They also get the chance to fast-track into Proof of Concept schemes with both the group, and the 11 countries which make up the core of the bank’s geographic footprint.
The output is really a win win for all involved, and ensure that the funding which can be critical for growth is not the only value that the startup receives from taking part.
To find out more, and to apply for this year's BBVA Open Talent Competition, visit https://opentalent.bbva.com/en/