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General Catalyst is expanding in Europe, linking up with a Berlin-based firm as the Silicon Valley venture capital group bets that the region will emerge strongly from a technology investment downturn.
The US firm is merging with La Famiglia, which has invested in a number of high-profile early-stage European start-ups, including generative AI company Mistral and defense group Helsing, and has picked up an illustrious set of investor backers since launching in 2016.
General Catalyst has $25bn in assets under management, compared with around $360mn managed by La Famiglia. Terms are being finalized, with the deal expected to close in early 2024, according to people with direct knowledge of the matter.
La Famiglia this year raised more than €250mn to invest in early-stage start-ups. Among its backers are the family offices or companies behind brands such as Swarovski, Adidas, and Estée Lauder, as well as entrepreneurs including Skype co-founder Niklas Zennström.
General Catalyst, one of the largest US venture capital firms, has invested in Europe for more than a decade, including bets on Helsing and travel search engine Kayak. It opened a London office in 2021.
It has opted to partner with La Famiglia because of its experience in seed — or very early stage — investing where on-the-ground knowledge of entrepreneurs and markets is considered a key advantage, according to chief executive Hemant Taneja.
“Seed investing is a local business and you have to be set up to interact with the founders,” Taneja said. “La Famiglia allows us to do that.”
Partners at the German firm, including co-founder Jeannette zu Fürstenberg, will become part of General Catalyst’s investment team following the merger.
“Europe has always had really strong innovation at its heart,” said zu Fürstenberg, a hereditary princess descended from a prominent family of German industrialists who own technology company Krohne Messtechnik. “We’ve driven innovation but been so bad at marketing it and capturing the value from that. Now some of [that value] is coming back.”
Europe has produced a number of high-profile start-ups — including financial services companies Revolut and Klarna and music streaming platform Spotify — attracting Silicon Valley heavyweights.
Andreessen Horowitz this year plans to open its first office in London, joining Sequoia Capital, Accel, Bessemer Venture Partners, and others. US investors spent €51bn in European venture deals in 2021, compared with less than €3bn in 2011, according to PitchBook.
But tech investment in the region has fallen sharply in the past year amid a global investment slowdown and some of Europe’s most highly valued start-ups have faced a reckoning. Klarna’s valuation has been slashed from $45bn to $6.7bn, food delivery app Getir has seen its valuation drop from a peak of almost $12bn to $2.5bn, and key assets from virtual conferencing company Hopin — valued at almost $8bn during the pandemic — were sold earlier this year for just $15mn.
Investing in Europe brings additional complexity for American companies, according to one partner at a US firm with a significant European presence.
“It’s a more dispersed and diversified market than the US. You need to cover France with French speakers, Germany the same,” he said. “Typically venture firms turn up and realize it’s harder to do than they thought,” he added.
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