- Sequoia Capital opened an office in London last year as it looks to target more European firms.
- It has a particular interest in Germany, said Matt Miller, a partner at Sequoia.
- He explained how COVID-19 was a catalyst for the “huge” momentum behind European startups.
This is an edited, translated version of an article that originally appeared on April 27, 2022.
Sequoia Capital has been increasingly interested in the European startup scene. The US venture-capital firm made a move into Europe last year, opening an office in London.
Part of the new London team is Matt Miller, a partner at the company for 10 years who was previously in Silicon Valley.
In an interview with Insider, Miller spoke about the European startup scene and what Sequoia is looking for in the German market especially — where it’s already invested in companies like the online broker Trade Republic and the software-as-a-service companies N8n and Xentral.
Sequoia is one of the first American VC firms not only to invest in Europe but also to open an office here. Why?
Until last year, we used to fly in from the US to close one or two European investment deals a year. But at some point that was no longer enough.
Now more and more global market leaders are coming from Europe — like Celonis from Munich, where we’re not invested. Or in the field of automation, we looked at a company from San Jose and one from Bucharest, Romania. In the end, the Romanian one was the better one.
We wanted to work as closely with companies like these as we do with ones in Silicon Valley.
What have you found out after a year in Europe?
The momentum behind European startups is huge right now, even bigger than we could have imagined. A big catalyst in this, in my opinion, was the COVID-19 pandemic.
Until now, many founders thought they had to move to the States to create a startup. The pandemic has completely stopped this wave of migration.
It’s made many realize that they can just build their companies where they are. If they fill their positions remotely, they also still have access to talent all over the world. It’s fantastic.
What’s your position in Germany like?
Germany is a very important market for us. At least every two weeks, one of us is on-site, so we’re very active there. When we opened our London office last year, we did scouting trips to Germany — 40 to 50 meetings in a week, from 7 a.m. to 10 p.m.
It was brutal. But we wanted to get an understanding of the market and meet as many people as possible.
What kind of startups is Sequoia looking for in Germany?
We’re particularly interested in enterprise software. There’s a whole wave of exciting software companies right now that are developing solutions for small and medium-sized businesses.
How do you think the German startup scene has changed over the past few years?
In the past, the ecosystem was dominated by Rocket Internet, which was also very successful and trained a lot of people. In recent years, the scene has noticeably blossomed and grown. It’s exciting to see that many of these companies don’t just come from Berlin, which was always the obvious center, but also from other corners of the country, such as Bavaria or Cologne.
That could also have something to do with the pandemic — people move less often today than they did a few years ago to start their company.
Is there anything that doesn’t work as well in Germany as it does in other countries?
The most difficult thing is that the notice periods are so long. Certain key positions are super important for the development of a company. Once you’ve managed to find a suitable candidate, you may have to wait another six months before they can start. That’s really tough. During this time, the company could have developed in a completely different way.
That’s a big problem that startups have in Germany compared to other countries where shorter notice periods apply. But apart from that, I think the diversity of talent and experience is huge there.
Many startups in Germany complain that they can’t find suitable people.
That’s a universal problem. We have an imbalance right now because so much venture capital is flooding the market.
That makes recruiting difficult, as there are a limited number of people who can do these jobs. That’s why I think we need to focus more on training and open up the market to more people.