Christoph Klink, GP at Antler: Europe's funding gap is also its biggest opportunity

0:00Hello and welcome back to Scaling Europe show. I'm Sid Johnson. Today on the show, we've got an amazing guest from Antler who has just released a very interesting report about the state of European tech. How are you doing today? Thank you for joining me.

0:11Christoph Klink:Very well. Thanks for having me. Really looking forward to our chat. Yeah, I mean, this is like a super interesting report. Data here that I don't think people would assume, but it's sort of like it's telling the tale of almost two things going on in European tech. We're seeing this amazing growth, more unicorns, better companies. We're seeing companies really winning. but there's also some strange stuff going on at the early stage um i guess like can you give me the headline and maybe some of the key points from it sure um so i think as you said right there's there's really two things going on right now and it feels like this extremes are getting more accentuated right now the one side is the one that fortunately we all speak about quite a bit because we all have to be optimists in the line of work that we're in and that is there's more founders building they are more experienced they're more technically skilled they're building bigger companies all of a sudden there's 13 deca corns in europe all of a sudden there's a new branch of unicorns after kind of that 2022 2023 slum and they're scaling faster they're raising a lot more money and they are attracting the best investors in the world so when you look at the Midas list, the share of them coming to back European companies at a very, very early stage is almost shooting through the roof.

1:29Christoph Klink:And I think that's very, very, very positive. And that's great. There's still a lot of work that we need to do. And I think we as Europeans, we're not always as optimistic as we should be. So we speak a lot about that work that needs to be done. But I think overall we're on a great path however there's this sorry go ahead no no i was gonna go ahead there's there's a flip side to all that where i think there's less attention being put on right now and when you look into the earlier stages of building then we see a bit of what we call a funding gap emerging because the number of companies being started the number of founders starting new companies is shooting through the roof it has been increasing pretty steadily after the the last peak of 2020 um so we're right now 50 60 percent over the peak and over the volumes of 2021 and it looks like 2026 is going to be even stronger so german startup association released the H1 numbers for Germany and they were 50 % above H2 2025.

2:39Christoph Klink:First half of the year 2026 was already above the number of companies started in Germany in 2024. So this continues. However, the number of pre-seed, seed and series A rounds isn't keeping track at all. So when you look at what has happened there from 2021 to 2025 into 2026, then they have decreased by something in between 40 and 55 % altogether. So that means that capital is actually concentrating in a lot fewer companies. And a lot of other companies are not succeeding in raising capital early on. And if you never raise a Series A, it's very unlikely you're ever going to see that hockey stick growth, you're ever going to shoot through the roof growth wise, it is possible.

3:26Christoph Klink:And we see great companies that are being bootstrapped. And very likely, we're going to see more in this age. But But still, we believe that there's probably a bit of attention that should also be devoted to what's going on in these earlier stages. Yeah, and I think the early stages is so interesting. I was reading the report, there was something like new total early stage investors have dropped by 40%. New investors entering early stage, I think it was 45%. And so we've had all this noise around fixing the growth capital stage here in Europe. And we're doing a lot of great stuff there, whether it's the EU scale up fund and some other bits.

4:06And, you know, there's more money flowing to that stage. But interestingly, we sort of have taken that the early stage is like a fixed problem. We've got a great ecosystem here. But as a result, we're actually seeing the number of investors drop and new investors drop. And yeah, what are the risks of this? Right. What happens if that trend continues?

4:25Christoph Klink:Yeah, I think what we're seeing is exactly that not a lot of new investors, emerging managers have grown into it. So in a healthy ecosystem where people are starting new funds, where people are spinning out of their own funds to start their own new fund, you would always see small managers growing into it. And they usually don't start raising a growth stage fund. They'll usually start raising a pre-seed or seed fund, start deploying with a relatively small fund, deploying relatively small tickets, and are actually going after those companies there. And I think in the tough market environment, it's not only tough for founders, it's also tough for people that are starting funds that we've seen essentially over the last four years.

5:09Christoph Klink:That number of new funds being set up has certainly dropped. So I think the tough thing is always you always have to keep in mind that the market behavior we saw in 2020, 2021, and somewhat into 2022 also wasn't healthy. So you can't take that as a baseline. So throughout the entire report, we always try to take the baseline of anything before that peak, which is probably conservative, right? Because we should have evolved further in the sophistication that we have as an ecosystem since what happened between 2014 and 2019. But I think that reloading of that lower tier of investors hasn't happened.

5:49Christoph Klink:There's a lot fewer people that have set up their own funds, the first funds. And then at the same time, there's some that have grown out of the very early stage. And then there's some that have just dropped out and are not active anymore or are simply taking longer to fundraise. So it's also stretching that deployment out. And I think that overall leads to fewer deals being made. At the same time, what I also found very interesting is that in those companies that actually make it, that are very, very successful, we called them rocket ships, which we thought would be a good term for companies that were started since 2020 and already became unicorns.

6:31Christoph Klink:On average, they take less than three years to actually get there, which compares to 7.2 years before 2020. So they're very, very fast, like a rocket ship. And they, on average, have seven investors, almost twice as many investors on board of their cap table when they raise their seed round. So it's not only more capital concentrating, it's also more consensus, it seems, building between investors. It's more investors hugging onto the same companies that are doing really, really well. And why do you think that is? In the report, you talk a bit about jets and juggernauts. I think we can go into that a little bit.

7:10But when you talk about some of those early stage rounds where there's a lot of consensus, is it because actually some of these companies since 2020 are able to experience much faster revenue growth? They're seeing much more traction. Is that a reason why? Or is it just because there's more consensus thinking in venture?

7:31Christoph Klink:It's an excellent question. We've been asking ourselves that question as well, right? Because what you see is quite striking, right? I think one of those elements that we try to understand is indeed, what are these companies like? Because when we talk about the fast-growing successes, we very, very often look at the lovables of the Ligoras of this world. We look at those companies that grow their revenue at mind-bottling speed. And we looked at those 33 companies that we called rocket ships. And we said there's essentially two different kinds of them. There's Jets, which are the lovables, the agoras of this world that are actually growing their revenue base at a very, very fast pace.

8:15Christoph Klink:They're quite lean. They're AI first and usually built by relatively young founders. but then there's a different tier which we call juggernauts which are companies like the mistrials of this world like the helsings of this world like the proximal fusions of this world that are a lot harder to build from a technology point of view so they're deeper rooted in technological differentiation and less deeply rooted in just pure execution of growth they take longer for the first product to ship if you're building a fusion reactor it's very unlikely you're gonna actually see hockey stick growth on year one and a half right so it takes a lot longer you're gonna have to raise a lot more capital up front and they're being built by more experienced slightly older founders that often way more often come out of academia and some of the the big uh the big labs like deep mine for instance and i think in in those two distinct cases what you see is for the jets these markets often become fiercely competitive because it is from a technology point of view it's it's not easy but it's relatively more easy to imitate what they are building now in today's age so it becomes all about execution and there's in some markets there's dozens of players that are going after the same market and it's really about those that are showing early on those breakout success metrics and then i think capital just accumulates there on average they raise new rounds every eight month every eight month that's that's that's mind-boggling speed right um for the juggernauts they they raise a lot more capital at an earlier point so when you when you look at average round sizes or median round sizes then the the median seed round and series a rounds for those juggernauts are pretty much twice as large um so median c is at 16 million median series a is at 60 million which is two to three times the round sizes that we see in in the jets and i think for for actually bringing that capital to the market it either needs what we spoke about a little bit earlier big us funds big minus list funds and or it needs quote unquote collusion between european funds and interestingly those juggernauts have way higher share of european capital in it where i guess there there may be some european sovereignty thinking in it as well where we're just as europeans we're trying to to hold together to actually make those successes that we see stand out even more yeah it's really interesting it's like yeah to to to raise the money from europe you almost need everybody to give a little bit of money it's like it's like a crowdfunding from venture and yeah i don't know it's really interesting and especially on the it's like the the fact these companies are becoming unicorns really quickly especially for juggernauts and maybe it's just because they need that much capital right and maybe unicorn is not like a very good term to describe them because normally unicorn you know it's like a badge of honor that you've got to a certain stage in your journey actually the reality is if you need half a billion dollars in compute to prove anything you're going to be a unicorn by default and actually maybe unicorns is not the right the right term especially for those juggernauts where it's It's like, you know, they need the capital just to like validate an MVP.

11:59You know, it's like a, I think the distinction that you've made is really interesting because it does highlight how fundamentally different these two types of businesses are. But when we look at the analysis, we just like bucket them all in the same thing. And we're like, oh, great, a unicorn here, a unicorn there. Wildly different profiles.

12:17Christoph Klink:Very much. And I think what we haven't seen before is those juggernauts starting to exist in Europe. And one of the areas where we're also seeing that is before 2020, we didn't see Deca coins. Now we've seen 13 Deca coins in Europe. And that's something that we haven't seen before. Yes, there's a bit of inflation in it. But other than that, it really is a different quality of company and a different kind of size of outliers that we may be seeing there. And I think that's a great sign of how European tech is maturing, actually, and how it is possible. Most of us have always said that. It is possible to build great outcomes in Europe.

13:02Christoph Klink:It may be harder, maybe, but it actually is possible. And now we're seeing more and more of those pinpoints that are showing that it actually is. Do you think there'll be a split as we move forward on the Decacorn layer between those jets and those juggernauts? I think about when I'm thinking about some of those recent Decacorns, like Lovable, but ICI, Bending Spoons, supposedly Lagora. I don't know. Actually, it seems fairly balanced. Helsing. I don't know. Do you see a world in which Europe ends up doing one thing really well over the other? I think we're going to be seeing both of these. But I feel like there's great appetite of investors for those juggernaut companies, because a lot of it is also about building solutions, building technology solutions that make us independent in then again, launching something into space.

13:57Christoph Klink:And then again, building solutions of our own that are independent of the geopolitical risk around that, right? So we've seen ISA Aerospace this week, actually the first European company launching from continental Europe on a commercial space mission, right? That's something that I think Europeans have woken up and have understood it may be strategically important for them to have that capability of doing that. because it could lead to so many more things that they can stack on top of that. I think that's a bit of a logic that in, let's say, the 2010 era of European tech probably wasn't there.

14:36Christoph Klink:If you build a mobile app or if you build an e-commerce company, what are you going to stack on top of that? If you build a rocket company, if you build a fusion company, then this has all sorts of ripple effects that are going to make you go further, that are going to make you more powerful. in what you can stack on top. And let's talk about London. I saw the report that I think 43 % of all Jets and Juggernauts are headquartered in London, which I think was like a 15 percentage point. So it was 28 % before 2020. What's going on in London? Why has this become such a big winner in this new age?

15:16Christoph Klink:I think there's two ways of looking at it. One way of looking at it is this is no news because London has always been the biggest tech ecosystem in Europe and frankly, the most competitive one as well. But when you look at kind of the last 20 years, then London has been insanely successful. However, there had been a number of really spiky outliers and some of them, two of them coming out of Stockholm, were those jets that scaled incredibly quickly, that became visible very, very fast. and that actually made headlines maybe a little bit earlier than some other companies. So one way of looking at it is just the balance of power is restored.

16:00Christoph Klink:London and the UK has always been a great ecosystem. It has always been the largest European ecosystem and it's probably something that everybody could learn from. The other way of looking at it is it doesn't really matter and venture has grown a lot more distributed geographically than it has been 10-15 years ago. When you look at globally, there's by now more than 400 cities in which a unicorn has been born. That number has five, six, seven folded within just 10 years. So I think we're seeing overall a trend that great companies are being built outside of those big centers. When you look into Germany, for instance, what's happening right now is that the growth of tech is way more resembling what Germany looks like from a geographical point of view.

16:53Christoph Klink:Germany is not just Berlin. The German economy by far isn't clustered in Berlin, right? But the early stage ecosystem for a while was really, really clustered in Berlin. Then they've added Munich to it, which has become the center of deep tech at least for Germans or for continental Europeans. And now there's a number of smaller cities that are also contributing quite well to that growth. So I think overall, it is further being stretched out. But I don't think there's going to be an argument that the UK and by that London is very likely the leading tech ecosystem that we have in Europe. But I think overall, we're going to be so much stronger if and when we work together.

17:38yeah and if it even feels like the european giants are becoming much more european than specifically to a city you know like the lovables in london now uh and a10s in london like a lot of the great companies are all over the place and they're becoming more european feeling i think um one final question before i let you go what are the key takeaways what are the key fixes you know whether it's uh improving that conversion rate getting more investors at the early stage What do you think Europe should take away from this and where we should think, okay, this is what we need to do to either fix the issues that we have or make us be even stronger?

18:18Christoph Klink:So I think the first one is on that one side of that coin, we need to keep backing, investing and singing the song of those winners that we are seeing. Because those winners are more spiky, more accentuated, they're getting bigger. and we have to be proud of that and we have to make sure that actually those great successes turn into durable successes right that it's not just a temporary flame and that will take everybody there that will take growth stage investors actually continuing to come in that will mean that we'll all be sourcing from them that will mean that governments are actually somewhat flattening regulatory surfaces there that we work on capital markets to actually create markets that are ripe for exits.

19:07Christoph Klink:But secondly, we believe there's a ginormous opportunity for investors right now in the early stages of investing. And we'd love to see more new managers coming in at Pre-Seed Seed and Series A to be backing some of these companies that are currently in that funding gap. Because there has to be greatness in that. I think in that funding gap, there's going to be some companies that are going to be very successfully bootstrapping. They won't need us as investors, and that's great. They're going to be way more lean in what they need in terms of resourcing because of AI. Then there's probably going to be some companies that, sorry for saying it, but should never have been started and only have been started because all of a sudden somebody could.

19:55Christoph Klink:Because it's become easier to build a product, become easier to launch a company, and it's become easier to build a company that makes 100k in ARR. So some of them are just going to not survive because they have just been built without kind of the deeply rooted foundations. But thirdly, there must be some that are perfectly good companies that are right now lacking the capital and the attention to actually earn the right to scale. And I think that's where great opportunity is. And that's where we as investors need to double down on backing even more great founders. It looks like the founders have outgrown the investors right now.

20:34Christoph Klink:So that's great, right? Because too many investors, too few founders is the worst thing. so too many founders and too few investors is the is the right thing but i think we need some catching up on the side of investors and lean forward into more of those deals that maybe have a little less pedigree yeah amazing and it just shows there's a real opportunity right there's a great opportunity for early stage fund managers if they can raise the money and deploy it in a way which is not just consensus and following everyone else there's going to be great opportunities for them well look crystal thank you so much for joining me it's a great report some really great data points.

21:07It's going to be interesting to see how people react. But yeah, we'll have you back another time.

21:12Christoph Klink:Lovely. Thanks for having us there.