Investing in European Startups.

Target Partner's Kurt Müller sat down with me to discuss why they chose to invest $6 million in Copenhagen-based Falcon Social, and where he thinks the future lies for European startups hitting the US.

David Carratt
May 5, 2014 - 4 min. read

In August 2013, Falcon Social, the Copenhagen-based Software as a Service (Saas) social media management platform, raised $6 million from a group led by early-stage venture capital firm, Target Partners. Eight months on, I talk to Kurt Müller, high-tech entrepreneur and partner at Munich-based Target Partners, about Falcon Social and his current views on the market.

Kurt_800x500

(Kurt Müller, Partner at Target Partners)

David Carratt: Tell us about the Falcon Social deal and how things are going–was it a traditional investment for Target Partners?

Kurt Müller: We’re interested in young technology companies, so from that perspective the investment was very much ‘business as usual’ for us. Normally, though, we help take businesses based in German-speaking countries to the US and world markets.

“This was the first time we would help bring a Danish company to the German and US markets. It’s worked well as Falcon have now taken the first steps to prepare for US entry, which we are planning for later this year.”

David Carratt: Why is it important for businesses to go to the US?

Kurt Müller: It’s a combination of factors. The US marketplace is large, homogeneous and often faster to develop than in Europe, which means a software company has the chance to scale up more quickly there. The American environment is also more competitive, so typically the market leaders are ultimately made in the USA, especially in the enterprise software space. And, in terms of raising awareness with investors and business partners – again, there’s scope and scale in the US that currently isn’t as easily accessible in Europe.

David Carratt: The timing of the deal was interesting as some investors felt the market for social media platforms was saturated. Weren’t Target Partners taking a risk – how did the firm become comfortable with getting into this area?

Kurt Müller: The explosion in the adoption of social media over the last decade has presented companies with huge challenges in managing their social media presence. In response, many software companies were started, each claiming to support social media usage in some specific way. We felt Falcon Social was catching a different, more holistic wave as the market matured.

“They had a differentiated position, offering an integrated platform assisting with all aspects of social media management within a large business context on a global scale. They were growing very fast, had signed up major accounts and had proven their business model, so it wasn’t difficult to get comfortable about working with them.”

David Carratt: Are there any other reasons you chose to invest in Falcon Social?

Kurt Müller: Yes, lots! The management team really impressed us. We’d been looking at some other firms in the social media management space, but felt Falcon were much better able to execute their plans and growth ambitions. Also, the business has had an international mindset and capability from day one. The team is cosmopolitan and multi-lingual–it understands external audiences and markets, and how to communicate and accommodate those different requirements. Also, maybe it’s a stereotype, but Falcon Social is a Danish-based company and the design of their product is first-class. The user interface is stylish, clear, easy to navigate and coherent from one part of the product to another; it’s a very satisfying and powerful software platform.

David Carratt: Is it possible for a firm like Falcon Social to become a global player with a presence in the US market, without a lot more capital investment than its current $9.5 million?

Kurt Müller: The perception that the amount invested in a business determines its success is misplaced. It’s true that some of Falcon Social’s direct competitors have raised amounts from around $24 million to $38 million, with one firm raising more than $180 million. So far, Falcon has built a very successful company with a relatively small amount of capital due to its very capital efficient business model.

“Falcon is in a great position to win further investment, precisely because it doesn’t really need it. The company is growing quickly, without hundreds of millions of dollars in investment; so, just think what might be possible with further capital – it’s an exciting prospect for investors.”

David Carratt: Why do you think European startups can be successful in the global market place?

Kurt Müller: European firms have a number of advantages in the social media management space, including requirements for a different level of data protection compared to the rest of the world. The security is very tight in Europe, which is attractive to international organizations, customers, and investors. Like Falcon Social, startups based in Europe are often international from the beginning. Businesses from a small country like Denmark, for instance, have to think and act globally from the outset if they want to succeed. The adaptability and insight this brings to European startups is invaluable in an international market. Falcon Social has all these qualities, and more. I don’t see any barriers preventing Falcon from becoming a global market leader, with a substantial presence in the US. It has a hugely competitive product that’s appreciated by customers everywhere, and has a management team that will make its international success happen.

FURTHER READING

Investment-Landscape-small    Investment-Landscape-small

Social Storytelling with Harvey Nichols.

Learn how Harvey Nichols manage 700,000+ fans across 8 countries.
Download