Europe’s constantly changing VC scene.

Europe’s constantly changing VC scene.

The news that Atlas is consolidating its office back over in the US is not surprising. They are doing what is best for them and the people who have entrusted them with the job to fund startups. It does reflect how much things have changed in the last couple of years for startups and their financing.

Just like every other industry, the whole scene has been impacted for the next several years. One can argue that the industry had too much money in it, or that their were inefficiencies. But put that aside. The reality is that as things consolidate, shuffle, or the dust settles, it will have an impact on the ecosystem.

During the last couple of rallies, it was great to just slap Internet, or later Web 2.0 to a company and go running with cash down the street. A lot of things get tried out. An idea can accelerate from 0 to 100 in no time at all, and shortly thereafter run out of gas and slam into a wall, being a “one hit wonder” that showed up in our tech blogs for a while. But the fact that startups are excitement made it interesting for money to flow into the system. Institutions with deep pockets could afford to trickle a few billion into the pipeline, and who could get mad at the fact that you were funding innovation and maybe the next Google would come out of the mix? Besides, it was the smallest cut of the whole pie.

Then comes the big crash and suddenly every fraction of a percent in those deep pockets counts. So that effect then trickles its way into everything. What we do see is that smart players like Google go around and grab up teams, products, and marketshare in things they like, for mostly discounted prices. And it makes life a bit harder for the guys on the ground raising funds. But then again, it really forces you as an entrepreneur to answer the question, “What the hell IS the actual business, and how does the thing make money?” To me there is no real doom and gloom scenario for startups here. There are a lot of hard decisions to be made. I think there are just as many great teams putting together great companies, a lot of which are not sexy enough to end up on the front page, but will still be successful in their own right.

All in all both sides will be acting leaner over the next few years. This means fewer funding announcements in general, as well as smaller sized rounds. In Europe the fight was already hard, and will continue to remain so. But what already started with Seedcamp and the Open Fund will continue to grow, as people start to see value in giving innovation a place to start. And there will inevitably be another bubble and another correction of some sort. If everything was perfect already, there would never be any reason to innovate or adapt.

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