How VCs are adapting to respond to an increasingly globalized startup market

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Hello my dear friends, I hope you are doing well. It’s the weekend! We hope that you will consume more sugar over the next few days than your doctor would approve of. After all, we will all die in the end. And on that encouraging note, let’s get to work!

TechCrunch’s recurring coverage of venture capital trends has taken an increasingly global tilt as the startup market has grown. expanded to fill each geography. Hence our growing coverage of the startup scene in India, not to mention our growing focus on startups from the African continent.

With so many startups raising so much money, it can be difficult to keep everything in order. But we’re not the only organization with our eyes on emerging tech companies busy adjusting to the new global startup reality. Venture capitalists are too.

In recent years, we have seen venture capital firms disrupting their operations to better adapt to a flat world for technological innovation. Larger funds with more partners to expand focus, for example, or the creation of country or region specific funds.

White Star is one of those companies with an increasingly broad focus. The venture capital group recently closed its third fund, a $ 360 million vehicle, and TechCrunch met the founder Eric Martineau Fortin a few days ago. But instead of discussing valuations or sectors, we mostly talked about geographies.

Martineau-Fortin lives in Guernsey, a small island located roughly between France and the UK. Residing between two large land masses is suitable for the investor, as his company’s first fund focused on the United States and Europe, roughly spreading the investment between the two.

White Star’s second fund expanded its geographic scope to also include a modest focus on Asia. The group’s third fund will be split around 40/40/20 between America, Europe and Asia, said Martineau-Fortin.

In particular, the group is not actively pursuing the Indian market. Which stood out, given the amount of capital flowing into the country, but White Star is focusing more on the South Korean and Japanese markets, so that it can invest more widely in Asia without putting India in the lead. from his list.

I riffed with Martineau-Fortin in other markets. He had some pretty positive things to say about the startup scene in Brazil – not a huge surprise with Nubank’s IPO – and Mexico. Put simply, the Latin American venture capital market is respected even by investors who are not focused on it.

The global venture capital market remains uneven, despite some flattening. The United States recorded $ 72.3 billion in total venture capital activity in the third quarter of 2021, by CB Insights data. Asia as a whole saw $ 50.2 billion. Europe managed $ 24.2 billion and Latin America only $ 5.3 billion. This means that there is likely arbitrage for the investor willing to add new time zones to their mix.

In the future, White Star could divide its investments into three thirds between the United States, Europe and Asia. I wonder if this will become a normal division of time. After all, the Internet is everywhere – without North Korea, China, and a few other markets – so why not invest capital in companies, well, everywhere?

The future of consumer investing

Taking a sharp right turn this morning, let’s talk about consumer investment in the UK.

I promise I’m going somewhere with this!

The stock market has caught up Free exchange this week, an auspicious moment because our call came as a result of The Bad Robinhood Revenue Report. As a reminder, Robinhood shares fell after the company announced a steep sequential drop in quarterly revenue, a drop in active users and slim numbers on total funded accounts.

The short answer to what happened from Q2 2021 to Q3 2021 in Robinhood is that crypto trading fell off a cliff on its platform, resulting in a poor income result. The company’s fourth quarter is expected to be even smaller than its third quarter. Not good!

I expected Robinhood’s results to be indicative of what Freetrade was seeing among its own user base. But speak CEO Adam Dodds, Nothing of the kind. Indeed, the company recently announced that it had reached one million users, but more importantly that it has secured 110,000 new funded accounts to date in October. It’s a huge part of the company’s aggregate user base in a single month!

With that barely bearish fact in hand, Dodds does not consider Freetrade’s main market in the UK to be nearly exhausted, and the company has expansion plans involving Canada, Australia and others to come in the future. next months. With, yes, crypto trading.

The other notable difference between Robinhood and Freetrade, aside from their currently disparate user growth numbers, is that the latter company does not engage in payment for the order flow. Instead, Dodds explained, the company makes money from subscriptions, a small slice of foreign exchange transactions, and interest on user money held.

The subscription element is the key to the long term value of the business, I think. Why? Because recurring software revenue is catnip for investors, and Dodds said about a quarter of people choose to pay for the paid version of its service.

If that ratio holds – or if it simply suffers modest declines – Freetrade could create a huge software company. Given how much the startup anticipates further penetration into its domestic market, not to mention foreign shores, there is money to be made. More when Freetrade rises again.

-Alex



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