the small sample

If you’re an investor or intend to become one, you need to be familiar with Atomico’s report released this week - it’s by far the best and most comprehensive research piece covering the venture business in Europe.

It’s free.

However, turning the tables around, if you’re a startup founder - not that helpful.

Why is that - the research represents a very small subset of people making a living as entrepreneurs. Atomico’s research covers only venture money - i.e. startups that already raised money from professional investors.

Do you know how many entrepreneurs *do not* use risk capital in Europe? Here, I looked it up for you.

EU countries had 23.5 million small companies as per 2015 - EU’s nomenclature considers a SME an org with less than 250 employees.

Assuming 10-15k venture deals in Europe a year and a 30% margin of not covering all the deals - let’s say we have 20k companies per year that we can infer data about from what various vendors track. Let’s assume for the sake of simplicity that in 10 years we have 200k companies having at least once used a risk capital product - this number is pretty much a standard proposition of data venture whole-sellers.

200k in a 23.5M universe. So Atomico’s research is representative for a sample lower than 1% from the European “startups”.

Point is - most of startups don’t or won’t work with professional investors. If you go outside that bubble you will discover that most entrepreneurs don’t build stuff to become filthy rich, or to change the world or because they want to become unicorns in 3 years. That’s the investors narrative because that is their business model.

Most entrepreneurs are usually simple people with a pragmatic mindset, trying to figure out how to make a buck by solving problems and having an independent lifestyle. That's more fulfilling than having 100 million instead of 10 million or even 1 in the bank. And they also built economic mechanisms using tech (which is pervasive in 2021), employing people, paying taxes and planning to grow their business. Just like the startup guys working with professional investors.

For every 1 founder that raised risk money, there’s 10 that didn’t make the cut (conventional wisdom) and 90 that most likely didn’t even consider this.

This is a lot of entrepreneurial value creation not accounted for by Atomico’s research. A research report as comprehensive about those guys would be really cool, wouldn’t it? 😊

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