Allocation to European private companies to increase, says LocalGlobe founder Saul Klein – Crunchbase News


Unprecedented amounts of capital have been invested in the world as good as in Europe in the first quarter of 2021, according to Crunchbase data.

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As such, I thought it would be interesting to sit down (via Zoom) with LocalGlobe founder Saul klein, serial founder and former leader of Skype and a seasoned investor in Europe, to get his point of view.

Saul Klein of LocalGlobe

Klein, who chatted with me from his previously co-founded London office Seedcamp with Reshma Sohoni in 2007 and was a partner at Index Ventures from 2007 to 2015.

“Everyone has discovered that Europe is not a border market. It’s an emerging market and could be a real market, ”Klein said.

Klein predicts that Europe will continue to increase its share of the pie. In 2010, there were eight unicorns in Europe. Currently, according to Crunchbase data, there is 92 unicorns on the continent, half of whom have joined the board since early 2020.

LocalGlobe recently closed on two funds, a $ 150 million XI seed fund and its $ 220 million second latitude fund, to invest more in startup companies.

Acquisition of a stake in private companies

“If we think there is a lot of capital in the private markets today, we haven’t seen it,” Klein said.

“Businesses are staying private longer and will continue to do so because there is still so much money available in the private markets,” Klein said who predicts “it will only grow.”

He quotes a Morgan stanley report that “Every 1% change in asset allocation from public to private equities represents approximately $ 390 billion in assets. For context, the buyout and venture capital commitment in the United States was around $ 315 billion in 2019. ”

Klein points out that “a 1 percent change corresponds to the entire US venture capital industry. So it’s not a question of if, but when.

Growth capital in Europe comes from outside

Major US venture capitalists have opened offices in London in recent years, including Sequoia Capital, Lightspeed Venture Partners and Bessemer Venture Partners.

There are close links between European and American venture capital. Accelerate has been active in Europe for over 20 years and currently has a private business portfolio of 87 companies. In contrast, Sequoia, Lightspeed and Bessemer have fewer than 20 private European holding companies each.

We have also seen the reverse. For example, based in Geneva Index Ventures opened an office in the United States in 2011.

Still, European endgame or crossover investors are still not coming to the party, with a few exceptions, according to Klein. These include Baillie Gifford, M&G (which created a private market fund of over $ 7 billion), Schroders, Legal and general and Railpen.

For Europe, most of the scaling capital is international, but it’s not just the United States, Klein said. He quotes growth investors around the world, such as US-based companies Sustainable, Coatue, and loyalty, Based in Canada Ontario Teachers’ Pension Plan, Singaporean companies GIC and Temasek, Based in China Tencent, Based in Tokyo SoftBank and Mubadala of the United Arab Emirates.

“Whether you’re a founder or a VC, it doesn’t matter if the growth cycles are driven by tiger or Temasek, ”he says. “But what it does mean is that when these companies are successful and they have liquidity events, the beneficiaries are not UK savers, they are not UK pension funds, they are not companies. British insurance companies. ”

This means, he said, “the people who really benefit from it will not be the economy at large – it will just be the founders, the venture capitalists, the bankers, the lawyers.”

For example, if a company like Cazoo goes public, “it doesn’t matter if they go public in London or New York, because the beneficiaries will not be UK savers,” he said.

Much of the allocation went to UK equities. Klein noted that when you look at the FTSE index, it has been stable for two decades. This contrasts with the Nasdaq and the New York Stock Exchange, which saw the biggest gains on growth tech stocks.

“A lot of the challenge we still have here is education,” Klein said. UK investors are not aware of the valuation of intangible assets such as software, he said.

Investors often ask questions such as: “How can this be useful?” They don’t have factories, they don’t have stores, they don’t have stocks, they don’t have machines, ”he said. “These are not real companies. “

LocalGlobe

Klein and his father Robin klein founded LocalGlobe in the early 2000s. Since 2015, the firm has reinvented itself, with nearly a billion dollars raised since that date. The company now has six general partners and nine other investment professionals, partner to partner, as well as other members of the operational team.

It also has an office and event space called Phoenix Court, in one of London’s poorest areas in Somers Town, in the Borough of Camden. The company is active in its community: it works with the local Camden Council and partners with the local elementary school and local high schools to provide support to the students.

The duration of LocalGlobe’s investments covers a large area, with many towns within four hours by train from its location, which is close to Kings Cross and Euston stations and also connects the company to centers like Oxford, Cambridge and Manchester in the UK. like Paris, Amsterdam and Brussels.

LocalGlobe will also invest outside of this radius, but believes that early stage investments require a tactile experience facilitated by physical proximity. The company has invested in the microprocessor Graphcore in Bristol, biotechnology company Oxford Nanopore in Oxford, accounts payable company Libeo in Paris and car insurer based in London Zego.

“In 10 to 20 years you will have a whole new, different kind of investor. And the commonality will be a growth mindset, an ability to understand how to value intangibles, including, by the way, founders, which is the ultimate intangible.

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