SPACs and investment as a whole is such a big topic that we felt one podcast episode is not enough to cover it. On episode 4 of Conversations in the Park we looked at what SPACs are actually about. We recorded that in April, when there was a big boom in SPACs. But, naturally, the landscape changed in the months since and the topic needed a second look, so we gathered Yasmine Fage, James Carter and Michael Perschke again to get their updated views (and we might have to invite them again in six months for a third instalment).
The conversation on episode 8 went beyond just SPACs and more into investment in general, particularly how is the European market different from the US. So if you were a startup, or in fact any company looking for capital, what would be your best option?
Our guests all agree that there is certainly a more conservative attitude towards investment in Europe. United States investors tend to be focused on potential growth and creating opportunities in the market with a long-term view, whereas in Europe there is a more risk-averse mentality. As Michael Pershcke puts it – The US is about the future and Europe is about the past. Yasmine Fage, who is currently going through the SPAC process, says that her company is being asked about ‘15 different KPIs’ that you wouldn’t think to ask about’.
A big reason for that can be how in the USA a company’s capital market growth is as important as organic business growth and essentially executives are rewarded for taking risks. But in the EU, they are penalised if a financial risk doesn’t pay off. That puts them in a position where they want to make sure each investment is sure to have a profitable return.
Of course, it is easier to be more confident in a country where there is more liquidity. Michael Pershchke shares that Europe’s venture depth is 10% of the availability of the United States. He goes further to give an example that in America, a startup can go to an investor and ask for 20 million at series A, but if they did the same in Europe that amount of funding is available at series D.
It is universally known that America has deeper pockets, which creates a separate problem – it’s hard for other companies to compete. Yasmine Fage explains how this is creating a monopolistic market that is dominated by American companies. So then, there is more money in the US, entrepreneurs are more likely to go there to develop their products and create even more capital and opportunities. And the cycle goes on repeating itself.
But there is a partial solution to that issue in ESG investments, as James Carter suggests. Right now there is a global movement towards sustainability and making your business more socially conscious. And CEOs are starting to realise that it is not just the right thing to do, but it also translates into higher share value and more profit. Big organisations now are putting aside a set amount of their budget to be spent on ESG and there are VC funds being set up with green goals in mind. Therefore there is more capital available to startups and enterprises who provide products and services that can help in ESG initiatives.
While Europe may be a couple of steps behind, there is a movement towards opening up more opportunities and shifting mindsets. Banking and other financial sectors are starting to realise they need to change in order to compete. Only recently, Switzerland announced they will be allowing SPACs on their bourse. More importantly, there are more and more European entrepreneurs that are creating growth and want to do that in Europe.
As we said, investment is a big topic, which we can barely contain in one blog article. Our guests provide more expertise during our conversation on episodes 4 and 8, which you can listen to below:
Episode 4: SPACs What are they all about?
Episode 8: SPACs What has changed in the past six months?
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