Local investors are key at the Early Stage

Atomico’s yearly report on European Tech (link) is a throve of useful information.

One interesting bit of information I would like to share is the source of capital invested in European startups.

Source of capital by deal size in Europe

Domestic investors are the primary source of capital for early stage companies (smaller round sizes) and become less and less relevant as the companies grow and raise successive rounds of capital.

This is espected as in the early stages proximity between founders and investors is key as it is the time where the most important decisions are taken and the future structure of the company is defined.

From an investor’s perspective, at the erly stage you’re investing in slightly more than a team and a pitch deck, so you want to be confident that your money is invested in setting up the company for maximum growth.

From a founder’s perspective, at the early stages you want to have access to experienced investors and their know-how and contacts on a regular basis. So proximity makes the most sense in this stage of growth.