French VCs first impression on Daniel Ek’s billion investment in the European tech scene

Nov 4, 2020 | Invest in France

Daniel Ek, founder, and CEO of music streaming platform Spotify, has decided to give €1bn of his private fortune (estimated at €3.1 bn) to European Tech startups. He will investigate “moonshot projects” to invest in, such as deeptech, which may encounter difficulties finding investors due to the higher technological risk they represent and their return uncertainties.

French Tech Magazine Maddyness has interviewed several VCs to get their first impressions on Daniel Ek’s announcement. They learned that French VCs see this significant investment as great news for the market. Frst Fund’s founder said he hoped this initiative would inspire others to do the same, especially during this tensed geopolitical context, boosting European private investments.

Daniel Ek will be advised by one of his first investors in Spotify, Shakil Khan, as both share a strong engagement for the European ecosystem. He will also consult scientists, entrepreneurs, investors, and governments. 360 Capital’s general partner stated he was delighted to see a new player feed the ecosystem, even more so, one who knows the limits of such a system since he had to go to the US to get funds for Spotify. In his opinion, it is opening tremendous opportunities, especially for disrupting companies.

How to finance deeptech startups?

Moonshot projects tend to have difficulties finding private investors due to their many uncertainties. However, very long-term private financing is key to the development and growth of such companies. Still, they often touch highly regulated fields, adding additional barriers, according to the Frst Fund’s founder.

For other actors, such as funds specialized in robotic projects, deeptech does not lack investors, as many funds have positioned themselves in the field. For them, Daniel Ek’s announcement will be synonymous with an increase in the sector’s competition, leading to a positive outcome. It indeed means investors believe in the European Deeptech, narrowing the gap with its American equivalent.
However, investors wait for Ek’s investment strategy to be disclosed, if he’ll bet on a few specific companies, when, with an influence or not – as it will determine the success or limits of his investment project.

Some might have their idea, such as Kima’s managing partner, who thinks he will build his fund with other investing actors. In contrast, others have established a parallel with another Nordic investor, Nicklas Zennström, creator of Skype and founder of the European VC firm, Atomico.

Read more: #FranceRelance, €7 billion to support technology and innovation

Reproducing as an investor what he has done as an entrepreneur

However, investors all agree that it is crucial to have successful entrepreneurs coming back to the ecosystem to invest. We have already seen some French tycoons doing so, such as Pierre Kosciusko-Morizet or Xavier Niel, who launched massive tech structures such as Station F or the school 42. But it is quite rare so far.

French investors see Ek’s announcement as a potential size effect like the one of American incubator Y Combinator which participated in the launch of over 2000 startups, including Stripe or Airbnb. Indeed, Daniel Ek’s announcement is not an act of philanthropy but intends to generate a return on investment of 10, 100, or 1000 billion. Therefore, he will reproduce as an investor what he has done as an entrepreneur, winning the consensus on Spotify against the Americans. As tech funds managers state, there is a lot of capital available in Europe, but it needs to be managed by capable people.

Making the French tech ecosystem attractive

A question remains, however, as if Daniel Ek’s large investment will reach the French ecosystem? Indeed, attracting investors such as Daniel Ek is a central challenge in the sector. The Nordics startup scene is highly dynamic both in investments and results and knows how to develop champions. However, for Elaia’s founder, there is no reason to doubt France’s tech ecosystem’s potential. Indeed, Daniel Ek will not be able to ignore the fact that France has many B2B tech companies. Even more, Spotify’s AI system is French, built by the company Niland (which it acquired). Moreover, Shakil Khan (Spotify’s head of Special Projects), who will advise Ek with its investment, has good knowledge of the French Tech since it invested in the Assurtech startup Alan.

Therefore, these factors can reassure France’s tech ecosystem and boost their motivation to get a part of those 1bn.

Read more: What if the right PaaS was European?

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Article written by Raphaëlle Delin.

Maxime KRUMMENACKER
Communications Manager
Maxime KRUMMENACKER
Communication Manager

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