Atlantic Labs

Marc-Olivier Luecke, based in Berlin, DE, is currently a general partner and MD at Atlantic Labs. Marc-Olivier Luecke brings experience from previous roles at Atlantic Labs, The Boston Consulting Group, WHU-Otto Beisheim School of Management and Barclays Investment Bank. Luecke holds a 2007-2011 Doctor of Philosophy in Philosophy, Finance.

Through this article, Luecke suggests that while the European VC ecosystem has made significant progress, it still faces challenges that need to be addressed to ensure its continued growth and success.

The ecosystem has grown and matured, with openness for entrepreneurship and a virtuous circle of successful entrepreneurs, angel investors and venture capital (VC) funds supporting new ventures.

Europe has shown its strength in areas such as climate, industrial and deep tech—a strong pool of talented engineers, scientists and industrial partners has provided an edge on the US ecosystem.

Following the market correction, we’re back in a healthy spot in terms of funding levels and valuations... But the ecosystem still needs to produce more cash exits, such as Vimcar, to give money back to LPs to reinvest in new funds.

The Struggles of VC Firms Raising Capital

Some LPs have slowed their allocation to the sector these last two years. This is partially because of rebalancing to less risky asset classes in a high-interest rate environment, but also because they are sometimes still waiting for distributions from funds, they invested in 10 years ago.

It can be difficult for new entrants, as LPs are recommitting to established relationships if they are showing strong performance, rather than risking a new fund manager. Climate-focused funds have been an exception, as LPs wanted to allocate more to that space.

“Availability of talent is the number one factor in making a local tech ecosystem successful. We need to ensure both easy immigration for talents from abroad and a local education system that trains the new generation of tech talents and entrepreneurs.”

We need LPs who can take the long view on the fundamental economic shifts happening instead of just chasing quick returns. We also need to broaden the base of LPs and help new players access the market, including pension funds, insurances and family businesses such as those from the German Mittelstand.

The ecosystem has also grown tremendously, with more than 2000 venture funds active in Europe now, many of them new entrants. Some VC market consolidation could be healthy, as it has become increasingly difficult both for LPs and for founders to navigate this fragmented market. Building both scale and credible, consistent brands will become more important.

The Growing Focus on Impact Investing in Europe

We have seen a good number of impact funds being raised, but the main surge has been specifically in climate technology. Rightly so, as this is a generational challenge we urgently have to face. We are a generalist Article 8 fund, but over the last three years, more than a quarter of our investments have been in that area. We see decarbonisation as both a huge opportunity and a social responsibility.

Addressing the Talent and Skill Gap in European Tech

Availability of talent is the number one factor in making a local tech ecosystem successful. We need to ensure both easy immigration for talents from abroad and a local education system that trains the new generation of tech talents and entrepreneurs. VCs can only play a small part in this, but openness to backing and supporting migrant entrepreneurs and helping founders attract international talents is crucial.

Over 40% of the teams we backed have a migrant background; they are often the most ambitious, hardest-working founders and bring fresh perspectives.

We have a four-talent team in-house as part of our Talent & Venture Development platform—who help our portfolio founders find and train staff across Europe. This is particularly crucial at the start of a new company when founders have no recruiting team and little time to spare.

European Regulations and Policies Supporting Startup Growth

A successful startup ecosystem in Europe needs access to international talents, access to private funding and as little bureaucracy as possible. Politicians can help by ensuring free market access and realising that any form of bureaucracy harms entrepreneurship and small businesses.

Predictions for the Future of European VC

Europe is learning to stand on its own two feet; there are tremendous opportunities in emerging technologies such as AI, climate, robotics and defence. The ecosystem will continue to grow and deliver abnormal returns as tech and VC become more important to the overall economic dynamism and strategic independence.

Private equity will become much more active as we see more PE-backed rollup plays with tech at its heart driving medium-sized exits. We will also see much more secondary transactions, both for larger assets—which is already common in private equity—and for VC portfolios at the end of the fund cycles.