Europe's resilience and long-term outlook in the face of a global investment slowdown may explain why LPs have recently favored transatlantic VC firms. In January, Giant Ventures closed two new funds totaling $250 million that invest in startups on both sides of the Atlantic, and today TechCrunch reported that Frontline Ventures has also closed on two new funds, named Frontline Growth and Frontline Seed. We have exclusively learned that it has raised $200 million.
Frontline has previously invested in both Europe and North America, and its new fund will continue to follow that strategy, betting on B2B software companies. The new seed fund will favor European ventures, while the growth fund will focus on U.S. startups.
The venture's logic here is that scale-ups in the United States are far more likely to succeed if they expand to the other side of the Atlantic. “Although Europe is traditionally an undervalued market, it accounts for more than 30% of global revenue for top-performing B2B software companies in IPOs,” said Co-Head of Frontline Growth. said Brennan O'Donnell in an article with fellow partner Stephen McIntyre. statement.
“Traditionally undervalued” is an oft-used expression to describe the European venture landscape, but once you stop comparing recent investment trends to the boom years of 2021 and early 2022, the situation is explained in the headlines. It's not as bad as it seems. Venture investment has slowed significantly over the past few years, but startups on the continent raised more funding last year than in 2019, according to a report from law firm Orrick. In fact, Europe was the only major region where investment levels remained above pre-pandemic norms, with Asia and North America both underperforming on this measure.
O'Donnell and his partners at Frontline have long been vocal about the value of Europe, backed up by their own research. Fundamentally, Frontline wants to make sure that U.S. companies don't leave money on the table by not going to Europe when they should, and O'Donnell said they want to make sure that startups don't leave their expertise behind when they're ready. By providing this service, the company aims to help people cross the pond. Expanding.
Expansion roadmap
O'Donnell told TechCrunch that Frontline focuses on four aspects when helping portfolio companies navigate expansion into other markets: timing, go-to-market strategy, talent, organizational design and location. Told.
It depends on the importance, O'Donnell said, and a company's location should be a derivative of the three aspects mentioned above. “Ultimately, location is determined by where your customers are and where the talent base you need to effectively support those customers is located.”
Frontline has already been implementing this framework in recent years, supporting portfolio companies such as HR software company Lattice and compliance platform Vanta in their European expansion.
“The lattice expanded when it wasn't obvious,” O'Donnell explained. The company put its plan into action during the pandemic, when people weren't yet actively flying, but there was also a sense that the 2020 decline might not continue, he said, adding that HR Technology He added that there was also a tailwind. Years later, that decision proved to be “very successful.”
One of the pitfalls Frontline warns about is “success amnesia.” Just because a company has had some success in the US doesn't mean it will do well in Europe without careful strategy.
“Vanta has grown as quickly as we have in our first 18 months in Europe thanks to Frontline’s guidance,” said Cristina Cacioppo, co-founder and CEO of Vanta. “Thanks to Brennan, Stephen and his team at Frontline, our customer base has tripled and our team has quadrupled, solidifying Vanta as a global market leader.”
In addition to partners and offices in London, Dublin, Palo Alto, and New York City, Frontline has built a community of executives in Europe and the Middle East, creating a network that our portfolio companies can leverage. “Over the last few years, we have formed a community for the top 200-250 VPs and GMs in EMEA and host regular events.”
O'Donnell said the company's current portfolio is scheduled for an IPO within the next 18 months. Of course, it takes a considerable amount of time for a seed bet to reach the exit stage, but Frontline is also keen on helping a seed bet move from his one stage to the next.
Regarding Frontline Seed, O'Donnell said the company has a “particularly strong track record of helping companies raise Series A financing.” Given that pre-seed and seed investments have not slowed down as much as they have in later stages, avoiding this bottleneck could be valuable for European startups hoping to scale up transatlantic or perhaps even become IPO candidates. There may be.