The Great VC Divide: Why U.S. and European Investors Bet Differently on Founders

The venture capital game isn’t played the same way in the U.S. and Europe. The differences aren’t just about money - it’s about mindset.

For years, U.S. VCs have been known for taking big bets on first-time founders with bold ideas, creating outlier successes like Facebook, Google, and Airbnb. European VCs, on the other hand, have built a reputation for playing it safe, favouring serial founders with proven track records.

But things are changing. European VC is outperforming the U.S. in returns. More capital is flowing into high-risk, high-upside bets. And the AI boom is shaking up traditional investment patterns.

For European founders, this shift raises key questions: Do you still need a successful exit under your belt to attract investors? Are VCs now more open to unproven but high-potential founders? Or is the U.S. still the best place to raise capital for world-changing ideas?

The Performance Landscape: Europe Ascendant

Historically, the U.S. has been perceived as the epicenter of venture capital prowess, with Silicon Valley emblematic of startup success. However, recent data challenges this long-held belief, highlighting Europe's remarkable ascent in the VC arena.

According to a June 2024 report by Invest Europe, European venture capital yielded a 20.77% net Internal Rate of Return (IRR) over a 10-year horizon, surpassing North America's 18.18% over the same period. This trend persisted over a 15-year span, with European VCs achieving a 16.57% net IRR compared to North America's 16.09%.

Further underscoring this shift, the 2023 HEC Paris-Dow Jones Venture Capital Performance Ranking revealed a significant milestone with three European firms breaking into the top 5. In fact nine out of the top 10 firms were non-U.S. entities. And for the first time, a European VC firm, Earlybird Digital East Fund, secured the top position.

This performance data refutes conventional wisdom that US VC dominates. In fact European VC investments have outperformed U.S. ones over the past two decades. This achievement not only signifies the maturation of Europe's startup ecosystem but also reflects the continent's burgeoning innovation-driven economy.

More Capital Is Good for Founders, Not VC Performance

Performance is one thing but the difference in capital availability between the two regions is quite another. The US clearly dominates in this regard.

According to Pitchbook data for 2024, the US venture market was measured at $209B invested across 15,260 deals (an average of $13.6M per deal). In contrast, the European market was measured at around $58B across 9,619 deals (an average of $6M per deal).

In other words the US funding market is 3.6x bigger than Europe in terms of $ investment and 1.6x bigger in terms of the number of deals. As a result, US startups received 2.3x the number of $ per deal on average in 2024.

These figures demonstrate that while the U.S. deploys more capital per startup, this abundance doesn't necessarily correlate with better VC performance. In fact, Europe's more disciplined and selective investment approach may contribute to its recent outperformance.

Attitudinal Divergence: Risk and Reward

The divergent performance metrics between U.S. and European VCs can be partially attributed to their differing attitudes toward risk and, by extension, their propensity to back serial founders.

European Caution:
European VCs have traditionally exhibited a more cautious and methodical investment approach. This risk-averse mentality often translates into a preference for founders with proven track records.

It's long been believed that entrepreneurs who have succeeded in prior ventures have a higher likelihood of success in subsequent endeavours. An early research study entitled "Performance Persistence in Entrepreneurship" conducted at Harvard Business School revealed some important findings:

First, that venture-capital-backed entrepreneurs who achieved success in their initial ventures (defined then as taking a company public) - had a 30% probability of succeeding in their next venture. In contrast, first-time entrepreneurs had just an 18% chance of success, while those who previously failed had a 20% chance in subsequent ventures.

The study also highlighted that successful serial entrepreneurs often secure venture capital funding more rapidly and at earlier stages compared to their first-time counterparts.This advantage is attributed to their established track records, which bolster credibility with investors.

More recent data from Mosaic Ventures indicates that 65% of Europe's unicorn founders have previously started at least one company, suggesting that European investors place a premium on experience and demonstrated success.

American Boldness:
In contrast, U.S. VCs are renowned for their willingness to embrace risk, often betting on visionary first-time founders with disruptive ideas. This boldness has led to the emergence of groundbreaking companies and substantial returns.

However, it has also resulted in notable failures, exemplified by high-profile cases such as Theranos and FTX. This propensity to back unproven entrepreneurs underscores a culture that values potential high-reward opportunities, even at the expense of increased risk.

Empirical evidence indicates that U.S. venture capital returns exhibit a wider dispersion compared to European VC returns, reflecting a greater propensity to support 'outliers' - both high-performing successes and notable failures.

Historically, the consumer sector - especially consumer tech and marketplaces - is where the U.S. venture capital market's 'big bet' strategy on unproven founders is perhaps most visible, being the launchpad for many well known names (e.g. Apple, Amazon, Facebook, Google, Airbnb, Snapchat, Twitter..).

Consumer has classically demanded lower upfront capital requirements (leading to faster market validation), massive TAM numbers, and winner-takes-all economics (based heavily on network effects), so beloved of US investors.

But this big-bet mindset now extends across many other sectors, with AI being the notable newcomer as we highlight below.

Serial Founders: A Double-Edged Sword

The European inclination to back serial founders carries both advantages and potential drawbacks for investors.

Advantages:
Serial entrepreneurs bring a wealth of experience, having navigated the complexities of startup development, fundraising, and scaling. Their familiarity with the entrepreneurial landscape can lead to more informed decision-making and, ostensibly, a higher probability of success.

This experience is particularly valued in environments where risk mitigation, high capital deployment, or long sales-cycles are dominant features. For example:

1. Highly Regulated Industries

• Healthcare & Biotech: Investors and stakeholders favour experienced founders who understand the lengthy regulatory pathways and clinical trial requirements.
• Fintech & Financial Services: Experience in handling regulations such as GDPR, SEC compliance, and anti-money laundering (AML) laws reduces risks for investors and partners.
• Defence & Aerospace: The procurement cycles in government-funded industries like defence and aerospace are long and typically involve national security concerns. Prior experience navigating these contracts, government relationships, and technological requirements is often prized.

2. DeepTech and High CapEx Industries

• Semiconductors & Advanced Manufacturing: Building chip fabrication facilities or launching new materials technology requires enormous upfront capital investment, making failure extremely costly. Investors seek founders with solid experience in scaling hardware businesses.
• Energy & CleanTech: The transition to renewable energy, carbon capture, and nuclear fusion technologies can require billions in investment. Founders with a track record in regulatory approvals and complex infrastructure deployment have a much higher chance of success.

3. Mission-Critical and Safety-Intensive Sectors

• Autonomous Vehicles & Robotics: Given the high safety risks of AI-driven transportation and automation, investors are more inclined to fund experienced founders who understand risk mitigation, liability concerns, and regulatory compliance.
• Cybersecurity: The consequences of security breaches in enterprise and national cybersecurity are severe. Startups in this space often require deep technical expertise, and repeat founders who have built and sold security firms command more trust.

Drawbacks:
However, an over-reliance on serial founders may inadvertently stifle innovation. By focusing predominantly on entrepreneurs with established track records, VCs might overlook first-time founders who, despite lacking experience, possess transformative ideas capable of reshaping industries. This cautious approach could result in missed opportunities for groundbreaking innovation and outsized returns - a key characteristic of the US venture scene. Nowhere is this becoming more apparent than in AI...

Stark Differences in AI

At a broad level, recent trends have suggested a gradual convergence in the attitudes of U.S. and European VCs toward serial founders and risk appetite. However, the explosion of AI investment - particularly in the U.S. around large language models (LLMs) and foundational AI research - has once more exposed stark differences in how both regions approach capital allocation, risk-taking, and founder selection.

European Shift - Balancing Risk with Market-Driven AI Innovation:
Europe’s venture landscape has been evolving, with a more disciplined, structured approach to investing proving effective in sectors like fintech, climate tech, and B2B SaaS. While this discipline has contributed to Europe's recent outperformance in venture returns, the continent has not mirrored the U.S. in making massive, speculative bets on foundational AI companies.

• Instead of deploying capital into moonshot AI startups, European investors have focused on application-layer AI - funding startups that integrate AI into existing industries like healthcare, cybersecurity, and enterprise software.
• Europe’s AI funding ecosystem has also been shaped by stricter regulatory scrutiny, with the EU’s AI Act setting guardrails that U.S. investors have largely ignored.
• European VCs remain more cautious about investing billions into compute-heavy AI infrastructure, preferring startups that have clearer commercialisation paths.

This measured approach is fostering a more nuanced venture strategy - one that balances risk with market adoption while ensuring capital efficiency.

American Reflection - AI Resets the Risk Appetite:
While U.S. VCs have been undergoing introspection especially after high-profile failures like FTX, Theranos, and WeWork - the current AI investment wave has reactivated aggressive capital deployment strategies, with a focus on backing technical founders in DeepTech AI, almost regardless of previous startup experience.

• AI represents a break from the U.S. VC industry's recent "risk recalibration." Despite post-ZIRP caution in SaaS and fintech, U.S. investors have doubled down on funding AI companies at pre-revenue, pre-product stages, often led by first-time founders.
• Dozens of US AI startups led by first time founders have raised early stage funding well in excess of $100M. Some have raised multi-billion-dollar rounds with minimal commercial validation.
• This behaviour contrasts sharply with Europe’s disciplined capital deployment and reasserts the U.S. tendency to embrace "zero-to-one" bets on ambitious, technically sophisticated first-time founders.

While there remains a broader trend toward convergence in founder selection and risk perception outside of AI, the AI boom itself has widened the gap between the two regions' VC strategies.

• In non-AI sectors, Europe and the U.S. are moving toward convergence - with U.S. investors demanding more capital efficiency and sustainability, while European investors are gradually becoming more comfortable funding higher-risk, high-upside ventures.
• In AI, however, the gap is widening. The U.S. continues to act as the risk-tolerant capital provider for world-changing technologies, whereas Europe is favouring a regulated, commercial-first AI approach.

Conclusion: So, what does all this mean for European founders?

Europe’s VC game is changing. It’s no longer just about playing it safe. High-risk, high-reward bets are gaining traction.

• First-time founders are getting more attention - especially the alumni of successful scaleups. The old bias toward serial entrepreneurs is starting to soften, but proving your technical or market expertise is still critical.
• AI is the great divide. U.S. investors are doubling down on moonshot AI startups, while Europe is favouring a more structured, regulatory-first approach.
• You don’t have to leave Europe to build a unicorn. Europe’s VC ecosystem is maturing, and investor discipline is paying off. But if you’re chasing big, speculative bets, the U.S. still leads the way.

The bottom line? The gap between U.S. and European VC is shifting, but not disappearing. Understanding these differences - and positioning yourself accordingly - could be the key to unlocking your next funding round.

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