Eric Liaw, General Partner at IVP: European founders should enter US earlier

0:00Scaling Europe:Hello and welcome back to the Scaling Europe show. I'm Seb Johnson. Thank you for following along. Today we've got a great conversation from our time at Slush and the conversation is supported by Databricks, whose unified platform power source on everyone's FY2026 target, becoming a truly AI-driven company, and Harmonic. Harmonic is the startup discovery engine used by leading VCs across the world to find their fun returners. Check them both out. Thank you. Amazing. Welcome back. We are still here in Helsinki at Slush. We're having a good time. And I'm here with Eric Partner, IVP, one of the leading VC firms globally.

0:35Scaling Europe:How are you today? Thank you for joining me. Thanks for having me, Seb. It's great to be here. Great to be at Slush. Love the energy. It's definitely chilly outside today. So for those of you at home, enjoy the warm comforts. But it's a great event. It's great to be here. And what brings you here? I'm not trying to be a shill for Slush, but I think Slush runs the best tech conference in all of Europe and arguably the world. And so I've been coming here. It's probably my 10th time. Wow. And so it's definitely a fixture on my calendar. Again, I don't mean to make this sound like an advert, but I'm a big fan of what they do here.

1:03Scaling Europe:When you come here, what are you looking to do? Is it support your portfolio companies, meet new founders, meet LPs? What's kind of the objective for you coming here? I feel like you've just nailed my entire four days here because it's all of the above. I mean, we have some companies in Finland, and so it's a very natural board meeting opportunity because everyone's coming in, certainly meeting with existing portfolio companies that are also here, new prospects. LPs have now started to show up. And frankly, it's kind of funny because, you know, I'm based in London nowadays. And when you take that flight this week, it's seeing all the people that you were trying to see for the last three months in London, but instead you just do it here.

1:39So it actually ends up being pretty concentrated, pretty intense, but pretty convenient.

1:42Scaling Europe:I mean, it's amazing. Yeah. I mean, the amount of people, the relationships that I've built online through social media and whatever, everybody's here. You know, everybody I've ever spoken to in the tech world is like in this tiny perimeter, which is amazing. How are you finding London? You know, I've been there about two and a half years now. IVP has been investing in Europe for over 20 years, but we had really done that via airplane from the Bay Area. And one of the things that we decided as a firm post-pandemic was you really can't do venture over Zoom. And I like to say that Zoom is a nice complement, but is not a substitute for face-to-face interaction.

2:17And we've had the good fortune to be involved with some of the most successful startups to have come out of Europe, whether that's Supercell or Klarna or Wise or UiPath. And we feel like there's more of that to come. There are very many talented people in Europe. Tech has spread from what was a cottage industry in the States to now a global industry. And in order to be connected to entrepreneurs, meet them earlier, be more helpful partners, we felt like setting up an office was the right thing to do. And so we did that. And there are now five of us full-time on the ground based out of London covering the whole of Europe.

2:46Scaling Europe:And how do you find it covering Europe from London? You know, the portfolio companies, you've got people like Supercell, Klana, very Nordic in their history at least, Spotify as well, and even Wise to an extent, you know, even though it's sort of like a London fintech. How do you see the ecosystems across Europe from your position in London? I mean, London is really a launching pad for us. I think if you look at the stats industry-wide, London is a majority of where the capital is based. But that just happens to be where the investors have offices and live. And many are American transplants like myself, and so it's slightly more convenient.

3:23But a pro and a con of doing a venture in Europe is that the market is more fragmented. And so you're spending a lot of time on planes and trains. We make two to four investments a year on this side of the Atlantic, and there's no guarantee that any of them will be in London. And we happen to have done one this year, which is great. It's literally down the street from our offices, so that makes it convenient. But otherwise, you know, there is a little bit more travel involved relative to, say, having a high concentration in the Bay Area.

3:50Scaling Europe:And how have you seen the ecosystem across Europe develop and change, both from, you know, your days in America, but also now kind of being here boots on the ground? You know, I think a common thread is that entrepreneurs want to solve problems that they have faced themselves and a very visceral experience that they have for themselves. And I think what you see is some kind of regional development and pockets of talent in certain areas across Europe. And so, for example, gaming is very strong and there's a very strong DNA and community here in Helsinki for that. There happens to be also a strong gaming community in Istanbul and also in Barcelona, which is kind of not what you would think about if you were just sort of throwing darts on a map.

4:28On the flip side, we've met with a lot of German companies, and they tend to be working, particularly in the software space, on things in manufacturing or factory automation. Why? Because they have not let that part of their economy degrade relative to other Western societies. And so startups going after that market will have early customers nearby. We invested in a company called Cradle based in Zurich. It is an AI application layer company that helps biotech and pharma companies accelerate their drug discovery process. Well, it turns out there are a lot of the world's biggest biopharma companies based in Europe.

5:03Nova Nordics is a customer, and so it's nice for them to be close. Roche, of course, as well. So there's that proximity that I think creates opportunity that entrepreneurs then want to go after.

5:13Scaling Europe:Amazing. I've actually got Cradle on the show tomorrow. Oh, excellent. Which I'm looking forward to. Can you kind of give an example of maybe a European investment that you've made and talk a bit about how you assess an opportunity, what you look for, and give a bit of flavor of that. Yeah, so one important point for us is that as a firm, our strategy is a single fund, single product. And while we have offices across multiple geographies now, every investment is measured against the breadth of opportunities outside. And so we do not have a quota by vertical market. We do not have a quota by geography.

5:47If the third best application software company is better than the first best fintech company, we'll make that third best application software company. Same thing. So every investment that we might make on this side of the Atlantic has to be as good as anything we might find anywhere else, including in Silicon Valley. And we think that drives the best results. So in that sense, things aren't really that different. We're looking for big market opportunities. We're looking for founders and founding teams that have drive, that have motivation, that have a unique angle on the market as to why their company will exist and should exist and should win the ability to recruit talent.

6:22And of course, we're looking for feedback from the market, i.e. their customers, whether they're enterprise-focused or consumer-focused. They have to be doing something that's getting their target customers' attention.

6:32Scaling Europe:Yeah, amazing. And what excites you about European tech ecosystem at the moment? We've had Atomica have just released a report on the state of European tech. I just had Tom talking about the report and all the insights and investments are up, valuations are up, enterprise value is up. There's more money going into it than there has been in a number of years. we seem to be over indexing or at least going big on the application layer. We've got an amazing kind of cohort of application AI companies coming through the ranks and scaling. When you look across the ecosystem, what is it that you're excited about?

7:02Scaling Europe:Where do you want to be investing or what are you seeing as like the real strengths of Europe? I would echo your point on the application layer. And that frankly is consistent with what we'd like to do as a firm as it relates to AI. Most of our investments have been application layer investments, and we've been very happy with that. But in terms of the European ecosystem, I think we're looking in for sort of pockets of relative competitive strength. And so I think Europe is really good on the fintech side, for example. I mean, there's one neobank in the US and there's at least three, maybe four that are bigger than that one in the US.

7:31And so you see that as an opportunity. I mean, Wise, for example, was born out of a local pain point. Most Americans don't travel outside the country and therefore don't need to change currencies, but that's very common in Europe. And so gave Tav and Christo the sort of opening to say, hey, we should actually, there should be a better way to do this. We shouldn't be getting fleeced every time we want to go from pounds to dollars to euros. And so we look for unique angles, but within that, the TAM still has to be big. And so when we're investing here in Europe, because again, we're judging them on the basis of any other company we might invest in, they also have to be going after markets that are equally as big.

8:05And so a prerequisite is that if you're based on this side of the Atlantic, you have to decide somewhat early on that you're also going to be a global winner or a global challenger and not just a European company if that's the case that's totally fine you might be a great investment but just not for us which is fine.

8:20Scaling Europe:It's one of those things that I actually that stands out among European founders and that's you know speaking to people from OpenAI and had LDR from Kleiner Perkins on earlier that Europeans have to build with a global mindset from day one because no local market is big enough and that if you want to scale just across Europe you have to scale across 30 different countries with 30 different regulations and processes and all this kind of stuff. So I think that's a really interesting point that, you know, that there's a slightly different mindset that international expansion and globalization is like a day one priority, unlike American companies where the market is so big that they don't have to.

8:57Scaling Europe:I want to talk about, you know, what role do you play in, if any, in helping, you know, European companies and founders access either American capital, American customers? What kind of role do you play there? We like to think we're helpful partners to our companies regardless of where they're based. In terms of this sort of transition you're talking about moving from one side of the Atlantic to the other, we actually think that's where our quote-unquote product market fit is in terms of the venture ecosystem. And so we're typically investing when companies have product market fit and thinking about the next chapter.

9:31So they've started to have some success in their home market beyond their home country. So by home market, I'll say they've had some success in Europe. And they realize, though, to what we've been talking about, they have to go after the U.S. market. And having U.S. partner, I think, brings a lot with it. There's sort of the stamp of approval that you actually are telling the world your aspirations are bigger. Having that stamp from a reputable venture firm in the U.S. helps, frankly, on the recruiting side. And you will need people on the ground to succeed. That really helps. It helps us open up our network to create opportunities for talent to come find these companies with the perception, hey, they're serious about being here in the U.S.

10:08Because I think as an individual job seeker, you don't want to take a career risk for a company that may not be committed to the market. And so that mitigates all that. And then very tactically, I mean, I'll give an example. We had a company that migrated to Austin, Texas. And they decided first to open up a sales office, inside sales, which is a logical place to do it. It's cheap. You can serve most of the country from there. they didn't know heads or tails on how to get that set up. So yes, you can help find lawyers, but we sort of guided them in the process. And then as they built out their inside sales team, we actually recruited in one of our former operators to basically coach the founders who are both technical and product-oriented to build a sales team.

10:45How do you set up comp structures? What's the right leveling? What's the right ratios? How do you actually interview people? Because the one thing about salespeople, particularly, and I mean this with all due respect, but when you think about European technical founders interviewing American salespeople,

10:58Scaling Europe:the American salespeople can tell a pretty good story. And so we have an American along the side to make sure you know that was actually a good question. That was a wrong answer. This person is good and that person is full of it. So having that coaching was actually really helpful. Yeah, I can imagine. I mean, one of the things we've been talking about a lot today is the strength of American storytelling. And it's so interesting to hear that it's like, that goes all the way from founders and investors and politicians to just employees trying to get jobs. And I've actually heard that from other founders is that Americans are so good at selling themselves that everybody seems like a great fit because they're just...

11:33Particularly for in sales. I mean, if you're a salesperson, you can't sell yourself. Yeah, exactly. You're in the wrong line of work.

11:38Scaling Europe:Yeah, that's super interesting. And then, you know, what do you think, you know, what advice would you give to European founders who are kind of thinking about maybe going to the U.S., maybe raising money from U.S. firms? What should they be thinking about? How do they go best about it? I would think that the world is getting smaller in many ways. So I think European-based companies might not have thought about expanding the U.S. until maybe they were 50 million in ARR, say. And I think that today that bar or that thought process has actually dropped down. Maybe it's 10, 15, you might start thinking about it.

12:16Scaling Europe:Now, current U.S. immigration policy aside, which we will not touch on in this broadcast, I do think it is important from a cultural perspective, and most companies have multiple founders, have one founder go and set up a beachhead. And New York is a very popular place for that, given the tech concentration as well as the proximity and the times. Those are things that are laws of physics that are somewhat immutable. And it doesn't have to be one person of the founding team raising their hands, saying I'm going there forever. But having some landing party to make sure that the company culture grows the way you want is super important, particularly the earlier you are in your development.

12:48So I'd say that that is almost a prerequisite at this point. And, you know, fortunately, I think even though I'm mostly a West Coast guy for most of my life, I do think New York is a very livable place.

12:58Scaling Europe:Yeah. And, you know, one thing that I hear is that sales in America is quite different to sales in Europe. How relationship driven is it? And, you know, how important is it to have somebody on the ground who is a founder to help with that sales process? Well, I think there's two different points there. I think it is important to have a founder on the ground because they can really speak to the product vision ethos mission. But if that person has just come over, I don't think they've probably got a lot of the existing relationships. And that's where you're often hiring an experienced sales leader or sales professional in the U.S.

13:31to be your sales leader. And the relationships help, but ultimately the product has to sell. And those things actually kind of go hand in hand. A great product without sales is not going to reach its full potential. and a great salesperson can get you somewhere with product, but similarly, you're not going to dominate the market in this day and age. I think in the past you may have been able to do that like Cisco did, but not today.

13:51Scaling Europe:And do you think you should be the CEO? Or do you think you could have a technical co-founder, a commercial co-founder? There's typically on a founding team, you know, someone would be the more product oriented and some might be more sales oriented. A lot of times what we're seeing is the product is built in Europe because that's sort of where the genesis is. and if there's someone that's more commercial, that person might be the one that would be in the States because it plays typically to strengths or interests, frankly. So I probably wouldn't pick up the product leader from Europe who's overseeing that function and dropping that person in the States because then they're actually doing remote management and don't get the benefit of the go-to-market capability.

14:27Scaling Europe:Got it. Okay. Look, I want to ask two final questions. One about your kind of personal portfolio of investments and then a final one about a guest I'm interviewing tomorrow. um so you know a vc i interviewed earlier this week so that every great vc has got three career defining deals you know the deals that they look to with great pride and that they're most happy with and that vc is just a game of making it in between those great deals when you look at your career to date and i'm sure you've got more to come what are the three great deals that you've been most proud of well i will certainly echo i hope i have more to come um but i'd say sort of trajectory changing, if you will, are really impactful ones for me personally.

15:09Supercell was one of the first ones I did at my current firm. It's based here in Helsinki, so we're in their hometown. It's a big part of the reason I come to Slush. Ilka sort of mandated that we all come the first year after the investment, and I was like, this is pretty cool, and I've been coming back ever since. Another one that I'm really proud of is being involved with Datadog. It's a great company. Actually, two European founders as well. They were originally French, but built their company in New York. So what they've continued to do, adding on products, being so disciplined in their growth, very proud there.

15:39And then one that is still on the journey, but I'm really proud of is Whoop, which I've been involved with for about five years now. And I think they have a real opportunity to, this sounds a little grandiose, but I think they can make it real, but they can truly impact the health outcomes of hundreds of millions of people in the world. And that's a pretty noble outcome to be able to do that, frankly, while making a great investment for my LPs.

16:01Scaling Europe:I was going to say, it's not a bad track record. That's three amazing companies that you've backed. What about the anti-portfolio? Are there any deals that keep you up at night where you think, oh, we had the opportunity to invest, but maybe we fumbled it and they said no, or we didn't see the vision, anything like that? How much time do we have left? I think one of the good news parts about my business is even when I get it wrong once, oftentimes we have a chance to rectify that mistake. Yes. And Datadog is a great example. We should have done it the first time we saw it and we didn't. And we did it a couple of years later at 10x the price.

16:35And it still worked out great. Robinhood's another one. So I try to learn from my mistakes and I will keep making them. But hopefully the ones that I get right will outweigh the ones that I get wrong.

16:45Scaling Europe:Yeah. And that's amazing of having the flexibility of being able to come in later. You know, you can see that you made the mistake, but you maintain that relationship. That's a final question. I've got Yarek from DeepL tomorrow. Anything I should ask him? Yarek is a really special individual. And I think we've talked a lot about founders and founding teams. Yarek is a very successful CEO leading a startup, but he actually wasn't the founder. So maybe talk to him about sort of what that experience was like for him. And then we talked about entrepreneurs solving problems that are very visceral for them.

17:17Talk about his personal story. He was born in Poland, moved to Germany when he was, I believe, 13, didn't speak the language. And And so DeepL, which is an AI-powered language translation company, they allow people to connect in the language that's most comfortable for them. And that's a really powerful thing. And so he'll light up when you talk about the impact he can have on people's lives.

17:36Scaling Europe:Amazing. Well, I'll definitely be sure to ask him. But Eric, thank you so much for joining me. Thank you very much.