The trillion-dollar telecom industry is switching from hardware to software, and Amsterdam-headquartered MessageBird is among those leading the charge. Founded in 2011 in a garage by a canal, the company now connects more than 15,000 enterprises – including Uber and Lufthansa – to their global customers via the world’s fastest and most reliable SMS, voice and chat APIs (application programming interfaces), according to TechCrunch. 

In 2017, MessageBird received what was, at that time, the largest ever early-stage funding round into a European software company by a US investor, following a $60m Series A capital injection from Accel.

Global mindset

MessageBird CEO and co-founder Robert Vis reckons the EU start-up scene deserves greater recognition. 

At first sight, the US start-up market appears to overshadow that of the EU. For example, starting a business in the US gives relatively easy access to nearly 400 million customers, who share the same currency and language, and who live under fairly homogenous state-wide regulation. To reach that same number of potential customers in Europe, however, a business needs to deal with 50 different legislations, says Mr Vis. 

“This complexity can make growth a bigger challenge in [the EU]. But those who have thought global from the start have a significant advantage and this tends to be the case in European start-ups as opposed to in those in the US,” he adds. 

Another major advantage in the EU is that workforces are often diverse, enabling businesses to better serve global customers across all continents, contends Mr Vis. For example, at MessageBird, employees represent 40 nationalities and 30 different languages.

Meaningful funding 

It is well known that access for start-up funding in the US moves quickly. A simple idea can get funded before one line of code is written, says Mr Vis. In the EU, meanwhile, start-ups need to show traction before investors commit. This uphill battle for funding in the EU is one reason why the people think “the EU can’t do tech”, he says. 

“But, with some of the US’s most prized unicorns recently fizzling following an initial public offering, investors on both sides of the [Atlantic] are giving the European funding model a second look. It’s a model where ‘traction-first funding’ fosters growth, not exits,” he says.

The traction-first model, which offers reliable growth born from necessity, has produced success stories such as Spotify, Atlassian, Klarna and TransferWise. Meanwhile, the US funding-first model has birthed exciting companies and technologies whose long-term success is still to be confirmed, with some seemingly falling from grace as quickly as they rose, according to Mr Vis. 

Earlier optimism

In early 2020, investor sentiment expected venture capital into the EU tech ecosystem to hit record highs and “come of age in 2020”, according to Atomico’s report. EU start-ups secured a record $34bn in VC funding in 2019, which is up 40% from 2018 and forecast to increase. 

However, the coronavirus pandemic has already slowed down venture capital activity in the EU, with early-stage start-ups seeking seed funding being the worst hit group, according to EU-Startups magazine. 

On the other hand, some start-ups and tech companies have found themselves in demand during the crisis, with the healthtech and medtech sectors  seeing significant funding. Moreover, around 200 start-ups are still hiring in Europe, according to the FT-backed Sifted website. 

The interview in this article was conducted before the global impact of the coronavirus was fully known.