Carlos Espinal, managing partner at Seedcamp: “The role that accelerators and incubators played [is] no longer as important”

Carlos Espinal, managing partner at Seedcamp: “The role that accelerators and incubators played [is] no longer as important”

Editor's note: This interview has been recorded and published as part of a content project in collaboration with the Japan External Trade Organization (JETRO).

With more than 10 years of history and over €1 billion raised across its funds, Seedcamp is one of the most well-known seed-stage VC firms in Europe. At the TechBBQ conference in Copenhagen, sat down with Carlos Eduardo Espinal who's been with the company since 2010 to talk about the funding landscape in Europe, the relevance of the accelerator model, service money, and much more.

This interview has been edited for clarity and brevity. Listen to the conversation in full on our podcast.

Q: What's Seedcamp, and how did you end up there?

The vision for Seedcamp has always been to back the earliest stage companies that have global ambition, with super ambitious founders. We've been doing that now for 12 years, we've had more than 350 companies that we've backed over those years — and the vision still the same. It's just how we do it that has evolved.

I was part of a fund called Doughty Hanson that invested into Seedcamp. Reshma Sohoni started it along with Saul Klein, and I joined full time in 2010, though I was involved earlier. Seedcamp originally started in a much smaller format, and it's amazing that it took off with a team so small.

I started off my career as an engineer. I worked at Baltimore Technologies, a cybersecurity startup that was acquired and then eventually fell apart. And then I ended up working at the SIAC, which is a division of the New York Stock Exchange that did the technology for them.

So, I really was exposed to technology, and I really loved it. At the time I met a friend who was in venture capital, and he shared with me how he gets to spend time with engineers and founders working on really awesome products, and I was like, that sounds like a lot of fun. I did some studies to transition away from engineering into business and understand the fundamentals of that. I worked with a venture fund in Boston as part of my studies, and then I came to Europe, and I've loved it ever since.

Q: …And you have never regretted leaving engineering for business, have you?

There's always that. There's always a part of you that wants to build things, and I think now I've channelled that into building Seedcamp. I think I'm horribly out of date with coding frameworks, so it would take me twice as long to build something now, but there's a little part of me that loves it. I think I sort of bring that to my interactions with founders.

Q: When you think about the history of accelerators in Europe, usually everybody says that Seedcamp is the first European-born accelerator — but I can't see the word “accelerator” on the website anymore. You don't really call yourselves that — why is that?

There's a couple of words that are usually tied together — incubator and accelerator. The foundation of those words is that there's a level of help that's required by a founder. An independent founder would not necessarily need that, but in the early days in the ecosystem, there were quite a bit of people who were new to entrepreneurship, and these ideas of incubators and accelerators were born.

When Seedcamp started, there was a community that was formed around helping founders and bringing the lessons learned entrepreneurship to accelerate their development. So, it made sense. But I think if you look over the last decade, there's been a lot of democratisation of entrepreneurship knowledge.

The other thing was that there were a lot of new founders who were serial entrepreneurs, and a lot of people became angel investors after they succeeded — and that also added depth to the community.

I think the role that accelerators and incubators played was no longer as important. At the same time, we saw a need for a community and a platform — and that became more important than the strict function of an accelerator and incubator.

And so about five years ago we decided that that was not something that our customers — in this case, founders — were really interested in, and so that's when we decided to move away from it.

Q: There are still more and more accelerators launching in Europe every month. Why do you think would that be?

We're a generalist fund that looks for founders with a lot of experience in the sector that they're approaching or with an edge that makes them stand out in a hyper-competitive environment, but not everybody's going after that kind of founder.

For example, there's a lot of really great incubators and accelerators coming out of universities, helping the intellectual property that's being developed in those environments get commercialised. That's a perfectly good and valid context for that.

I don't want to vilify the idea; it's just that as it pertained to us in our needs, it was not something that was really delivering the value to the founders that we were engaged with.

Q: How did the transition go from the accelerator model to the “normal” VC model?

One of the interesting things that we're seeing right now is the idea that venture capital isn't just about the money. It's now about many more things. You see Andreessen Horowitz and a lot of other funds delivering what I call service capital.

The money isn't enough: there are relationships that you're shortcutting, which is critical, but then there is the understanding of what the typical issues and pitfalls are. It's also about creating a community; one of the biggest value adds that we've received feedback from our founders about is the ability to get feedback about an issue that they're going through from a founder that just went through it.

In that case, it's not a celebrity founder ten years down the road giving advice — it's literally somebody who's maybe only six months down the road and who just went through the same experience and can share it.

I think we're coming to an age now where the value proposition to founders is that you're joining a community of people who are like-minded, who have the same level of ambition, and who have dealt with a lot of problems that you're going to go through, so that isn't such a lonely experience and you have resources to tap into to solve those problems.

Q: In the US, you see a lot of people move into the country from far away to start their business there. I can't say I see as much of that in Europe. Do you actually see more people moving to Europe from other continents to start a business? 

When I look at the UK startup scene, I definitely see quite a bit of people coming from all over the place to start a company, especially from all over Europe — less so from Asia or South America. During a time when I spent in Hong Kong, I also saw a lot of European founders going to Asia and starting a business there.

I think what we're seeing is that capital mobility, as well as people mobility, is very different today than it was ten years ago. There are some industries where that might be the case. If you're a fintech entrepreneur and you want to start something, London is a hub, so I wouldn't doubt it if there was a lot more migration.

But if you're looking at things like gaming, it's Finland, and you'd go to that area. But then if you're looking at other areas, like mobility, is that more Asia or is that more the US? I think it varies by segment, by the countries, and the attitude towards having and welcoming people.

Q: What do you think about the dynamics of the European tech in general, and first of all, what do we need more of to build a healthy ecosystem here?

I think the biggest right now is around mergers and acquisitions, in having more M&A in Europe, so that there is a pathway for founders and funds and capital sources to be able to complete the cycle. And you see a lot of that in the US. There's quite a bit of an acquisitive temperament in corporations in the US.

I've been trying to tackle this and to figure out what could be done, and I think it's a combination of things. There's a couple of other things we could talk about like pension money being unlocked for funds, but there's enough money, so that's not the biggest thing.

If you look at corporations that by companies, there are certain attributes that they have. I think there is a cultural disposition towards buying versus making. I've had interesting conversations with companies that were building something internally that already existed in an external startup, and I would ask, why don't you just buy that company, and they were like, well, I think we can build it better. Until there's a shift there and there's an understanding on how to acquire and how to incorporate that team without killing it, things won't change.

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