A conversation with ‘the most ambitious female VC in Europe’

Blossom Capital, the venture capital firm co-founded by ex-Index Ventures and LocalGlobe VC Ophelia Brown, just raised a new $185 million fund.

The firm’s remit remains broadly the same: to be the lead investor in European tech startups at Series A, along with doing some seed deals, too. In particular, the firm says it will continue to focus on finance, design, marketplaces, travel, developer-focused tools, infrastructure and “API-first” companies.

Pitched as a so-called “high conviction” investor, Blossom backs fewer companies by writing larger cheques and claims to have close ties to U.S. top-tier investors ready to back portfolio companies at the next stage.

Just two years old, its portfolio companies include travel booking platform Duffel, which received two follow-on investment rounds led by Benchmark and Index Ventures; cybersecurity automation platform Tines, which received follow-on investment led by Accel Partners; and payments unicorn Checkout.com, which is also backed by Insight Partners.

Good timing, therefore, to have a catch-up call with Brown, where we talked investment thesis, why Europe is at an “inflection point,” diversity in the investor community and the increasing money coming into Europe from American VCs.

This interview has been edited for length and clarity.

Extra Crunch: On what basis — hold on, what does it say here [reads from PR briefing notes] — are you “the most ambitious female VC in Europe?”

Ophelia Brown: [Laughter] Um, I guess the way that we think about opportunities and markets and the risk that we’re willing to take at the early stage. I think the way that we have built our fund is quite unique versus other funds. And so we take a very concentrated approach. When we invest we’ll make only five investments a year; our fund will actually end up being 12 companies. And that’s in comparison to a typical venture fund that will do 35 to 40 companies out of a fund, which means every company for us really counts. And so it’s much bolder and riskier a strategy and I think that’s kind of partly where we can claim that. I also think that there aren’t that many female-led funds that have been built in Europe. There are obviously more coming to market, like Ada recently announced, which is great. But yeah, I mean, when we started, I was certainly one of a minority.

Okay, I’ll let you have that one.

Thank you.

I’ve been looking at your portfolio, and there seems to be, as it says in the press release, a little bit of a pattern of follow-on investment from America. Now, obviously on a macro level, that’s not unusual. The Americans seem to love us at the moment. But what is the key to getting U.S. investment? And why is it important to you?

When we began with Blossom I, there was a clear trend that we saw and the gap in the market we wanted to occupy was that at the very early stage, founders still wanted to raise their first round from a West Coast fund, primarily for a lot of their operational experience, obviously their brand and their expertise, but [would] repeatedly be told by these West Coast funds that they don’t do early stage in Europe. They don’t have the local expertise and the knowledge to really help them grow at these formative stages, but would be very interested in the next round.

And so from raising Blossom I, what we wanted to do when we started was to kind of occupy that gap; really have an experienced team of investors and operators that could help grow companies at home, but choose founders that very clearly had global ambitions and wanted to build very large companies that could go on to become category-defining businesses in Europe and in the U.S., and these are the type of companies that we knew would be attractive to U.S. funds.

We actually mapped out where the “unicorns” in Europe went to raise their Series B, and the overwhelming majority go on to raise from a U.S. growth fund or Index Growth or Accel U.S. It was obvious to us that these funds are going to be critical to the ongoing building and success of these companies, so we wanted to position Blossom as a credible partner to all of these great funds.

I think I must have written the headline 10 times: “VC firm X in Europe is building a bridge to the valley.” So how are you different? How are you establishing those relationships in America? Or is it just the companies that you’re picking?

No. I think some of it is long-standing relationships, having now been in venture almost 10 years. When I started at Index back in 2012, I would spend half my time in the valley, you know, working with companies like Big Health that relocated over there, from Robinhood when they were just six people, to spend a lot of time building the networks and then subsequently went on to co-invest with many of these great funds.

So we had Ribbit come into Robinhood at Series A, we then had NEA come in afterwards. We had General Atlantic come into Typeform. And when I was at LocalGlobe, we co-invested with Crankstart Foundation, which is Michael Moritz’s fund and Sequoia came into Tessian where I had led the seed there. I started to build a number of co-investment relationships as well. And when we went out to raise Blossom, a couple of partners from the funds invested and formalized relationships that we already had.

I think now with Blossom fund I’s portfolio, obviously we co-invested with the likes of Benchmark, Index, Accel, Greylock and others. And so I think it’s not only the relationships that we built by looking at deals together but is also the co-investment relationships.

Ophelia Brown’s Blossom Capital raises new $185M European early-stage fund

In terms of the LPs in fund II, are they broadly the same?

All of our existing investors came back to do more, which was a great show of support. And we added six new institutions and five of those came from the U.S…. so we’re in great condition as we launch our fund II.

And in terms of the time you spent raising this fund, it seems quite quick. Is that because you spent all the money in fund I?

[Laughter]. No… Interestingly, if you contrast our fund I and our fund II deck, they were basically exactly the same. So fund I was, “this is what we’re going to set out to do.” And then when we came back to raise fund II, it was, “we’ve done all of that and here are the proof points.” And fund I has performed exceptionally well. So start to finish was three months for us, from initial conversations to the closing of the fund.

And were there LPs in fund II that were quite interested in fund I but didn’t get their act together in time?

Yeah, I think for many people investing in a first-time fund is an incredibly risky proposition; they actually vacillate between being the worst-performing and the best-performing. So many LPs [were] where we built strong relationships with fund I, but we knew that they would probably never come into our fund I. All of the ones we brought in, we had pre-existing relationships with, so we didn’t go out broadly to market beyond those.

It says here in the press talking points — I love it when PRs try and prepare my interview for me — that Europe is at an inflection point. Is it? And what is the inflection point?

I think it is. Having now been in this ecosystem for so long, I think the inflection point is the number of successful high-growth companies that we’ve produced from Europe, be it Adyen, Spotify, Farfetch, Elastic and Klarna, where my [Blossom] partner Louise was as well, I think what it has really shown to people is that you can take risk at the early stage and build meaningful businesses from Europe. And I think that’s really encouraged a new next generation of entrepreneur. And Europe is changing its mindset that it’s okay to fail.

And I think the other shift is that now people are saying, “okay, well, I’m not going to move to the valley and trying to build my teams because talent is so competitive and so expensive over there, I want to build in Europe.” And then finally, the great engineering, design, product talent here and then being helped by funds like us to scale it at the beginning and early stages, and then going on to produce some really interesting things. I don’t think U.S. funds are coming over here because they see cheaper pricing and lower valuations. They’re coming over here because they are looking at markets and industries and finding the potential next best thing over in Europe.

What are the type of companies or sectors where you think Europe absolutely excels at compared with the valley or elsewhere?

I think there’s a new generation of entrepreneur that is very product-driven, has an engineering background or mindset or is self-taught. In fact, if you look at our first portfolio, 60% of our founders were either studying engineering or self-taught, which is something that you didn’t necessarily get 10 years ago. And they are thinking global from the outset. They’re not thinking about conquering local markets, building regional players, and they’re not thinking about building U.S. copycats, but truly differentiated products. And those are the types of founders that we’re very excited by.

There are obviously other areas where Europe has had a long history of success, financial services, security, for example, gaming, where I think success breeds that next cohort. I think we’re seeing a lot more activity in those areas. But I think there are more and more sectors where entrepreneurs are proving that they can build really interesting businesses, whether it be in healthcare or entertainment, consumer, mobile.

Is Europe in a bit of a bubble, because I feel like it could be?

I don’t think what is happening here is a bubble because I think you can look to fundamental shifts that are causing this trend. It’s partly that we have 10 of the best engineering schools in the world in Europe. And before, these engineers would graduate and go into corporates and now they’ve seen a lot of success by going into a startup, they’re choosing to build instead, or they’re going on to be trained by Google, Facebook, Apple, Amazon, who all have their European headquarters over here, which weren’t in existence 10 years ago. And then they’re going on to get great training and they’re spinning out to start themselves. If we take the example of Tines in our portfolio, where Owen and Thomas had worked together almost 15 years — Deloitte, PayPal, then DocuSign — and spun out to build their own, or Steve, the founder of Duffel, who came out of GoCardless. Those stories didn’t happen five-10 years ago, but now they do.

Yeah, absolutely.

And I think there are other shifts, you know, the rise of software-as-a-service; that you can sell in to the U.S. without anyone on the ground there. If we take the example of Frontify in our portfolio, which is based in Garland in Switzerland, when we invested something like 30% of their revenue was coming from the U.S. and they didn’t have anyone on the ground.

With the historical lack of diversity in venture, in every sense, not just gender, one could argue that this impacts the types of companies that are being funded, and that maybe if that’s out of kilter, it could lead to the wrong companies being funded, or the problems that the world faces not being solved?

When you’re investing in early stage, it’s all about seeing something that someone else doesn’t see or doesn’t believe; that’s how you get to outliers. So if you’re all assessing founders or opportunities or markets with the same lens and the same frame of mind or reference points, you won’t see anything different. When we started with Blossom, we really wanted to ensure that our partnership is, as you say, diverse in every sense of the word, so it’s not only about gender, it’s about ethnicity, background and upbringing, etc. And I think that is really important in venture and I think that’s why the conversation is being brought to the table again and again, because we need to see changes and improvement if a diverse range of founders are going to be able to raise capital.

In fund I, how many investments have you already made?

We have made eight investments.

And of those eight, how many would you describe as a diverse group of co-founders. [For example], how many are women?

So female founders, we have two of the eight, but I would say more female representation at the early stages of a startup when we invest, which I think is almost as critically important. Because when I founded Ambitious Ladies in Tech, it was all about making sure that not only you got junior women into startups but also that they stayed once they were there, so there was the appropriate mentorship and the promotion and recognition of women. So a lot of the work we do with companies is making sure that from their hiring plans from day one — and we back teams where it’s just been the founder — diversity is top of mind rather than leaving it to a point where you’re 30-40 employees plus and you’re trying to change dramatically the nature of the landscape.

When we invested in inne, which has a female founder, I think watching through her lens in what it was to pitch all-male partnerships, you can really see the importance of needing a woman on the team, but you have to look at every opportunity, not just investing from a diversity perspective, but from a clear, “is this the best opportunity we can invest into?”

Yeah, absolutely. It’s a weird one for me, because when I think about this on a really personal level, I’ve always been the only person in a wheelchair in the room. And it hasn’t fazed me one bit and I have been met with plenty of prejudice, but it’s a weird one, isn’t it? Now you are a prominent female VC, do you still face that kind of moment?

Something that was interesting when we raised our fund I and then fund II, there are more pockets of capital now for female-led funds, female founders, with a real diversity angle. And actually, we found that the pockets of capital we could raise capital from are ones that are purely returns-driven. In the same way that they would assess any other manager, male or female, black or white. And some of these diversity pockets I think are just quite skewed in their analysis and how they see things. And so I think that sometimes having these pockets is not beneficial for the ecosystem and that they should make sure that their regular assessments and tracks are just the same rather than having a special diversity pool.

Is that because of the signaling: if a company takes money from that type of remit, everybody, without saying it, sort of thinks they’re not really up to scratch, they couldn’t raise from a mainstream fund?

I think the way that the programs have been structured, quite often you just have to jump through additional hoops and things that aren’t necessarily required by people who do this every single day rather than being a special group for diversity’s sake.

Returning back to American investors, obviously, we’re seeing some of the big American firms put more people on the ground in London and elsewhere in Europe. And there’s been various press rumors about some of the really big VC firms opening an office in London. If that does happen — it clearly is happening to a certain degree — does that threaten your value proposition?

No, I think it’s very welcome. If it is true — and you have been very wary of the VC rumor mill — as we see it, these funds are investing at a stage after us. So, from a capital allocation and expertise standpoint, they’re still figuring it’s when they can deploy north of 20 million and really help companies bridge the European-U.S. gap, and be in that position to be the best time for them. So it’s still welcome, if that is happening, they’re still not going to be doing the early stage where we sit.