The Race To A $100 Billion European Scale-up

Raphaëlle d'Ornano
8 min readDec 1, 2021

Right out of the gate, 2021 has felt like the year that the world of late-stage investing has been turned upside down. The invasion of non-traditional investors such as Private Equity Firms and Asset Managers into the startup funding scene has scrambled the rules about valuation and metrics that venture capitalists and entrepreneurs had spent decades refining.

No use pining for the good old days. There is no time. Everything is moving faster and continuing to accelerate. VCs and founders must understand and master the new rules of the game and adapt accordingly so they can work in harmony with investing goliaths like Tiger Capital, Coatue Management and Dragoneer Investment Group.

So, let’s look more closely at the implication for scale-ups, particularly European scale-ups who were only just getting accustomed to 8 and 9-figure rounds. With Gorillas raising a €950 million Series C round in September, we are seeing rounds tiptoe to the €1 billion mark. For the giant funds writing these checks, the unicorn benchmark is a spec in their portfolio.

Forget the €1 billion valuation. These non-traditional investors are fueling a race to create €100 billion scale-ups.

These investors are giving founders the financial resources to pursue that goal, creating a staggering opportunity to become global champions. Less obvious are the risks that come with accepting those checks. Reaching that lofty valuation requires grasping new metrics and new due diligence. Above all, it means being prepared to relentlessly pursue growth and scale at a breakneck pace.

Early-stage founders are typically wondering if they have found that celebrated product-market fit. Now, late-stage founders must ask themselves a very different question: Is my company fit for growth?

This is largely unexplored territory. Lots of VCs can hand you a playbook for getting to a €100 million valuation. But who has the playbook for reaching €100 billion? Founders who take those big checks without having the right structure, discipline, and attention to metrics are inviting chaos. And when they stumble, they will find these non-traditional investors are far less sympathetic to their missteps than a traditional VC who is accustomed handholding and offering encouragement.

With no clear roadmap, the stakes for success and failure are skyrocketing. The winners will reach spectacular heights. The failures could be even more brutal. So let’s explore those risks and the new rules so you’re prepared when someone lands on your doorstep with a €200 million check.

By The Numbers

Before we explore the new terrain, let’s survey the current investing landscape for context. According to the CB Insights report on venture capital for Q3, global funding for startups hit $158.2 billion for the quarter, up an astonishing 105% from the same period one year ago. Digging into the numbers, we can see what is driving this phenomenon:

- There were 409 mega rounds ($100 million or more) in Q3 compared to 172 in Q3 2020.

- Europe remains third in overall funding and deals ($24.2 billion across 1590 deals), behind the U.S. ($72.3 billion for 3210 deals) and China ($50.2 billion for 3815 deals).

- Of the top 10 equity deals, 3 were in Europe: Berlin-based Gorillas ($950 million), U.K.- based Revolut ($800 million), and Estonia-based Bolt ($713 million).

- VCs funded 31% of all deals compared to 18% for Private Equity and Asset Management.

- The median time between rounds is falling across all stages.

- Europe has 2 scale-ups on the path to that €100 billion valuation: Sweden’s Klarna is currently valued at $45.6 billion, and Revolut sits at $33 billion.

- There were 2 NTIs in the Top 10 investors by number of deals: Tiger and Hillhouse Capital Management.

What can we take away from this? Venture capital is still venture capital. The things it has traditionally done are still happening at the early and middle stages of investing.

It’s the late stages, particularly pre-IPO, where scale-ups are caught in a whirlwind.

The Shakeup

This new era of investing has shaken up the perspective of founders. That creates the conditions for confusion and misunderstandings.

Whether you are a first-time or serial entrepreneur, the rules for working with venture capitalists are well established. Even if different funds have their own philosophies and methods, the relationship is ideally one of allies: The VCs are there to invest but also to be by your side as the company moves through each phase. When there are stumbles, the VC hopefully has the experience to offer guidance and support.

In return, that VC firm is looking down the road to a return of many, many multiples on its early bet on a company with little or no track record, maybe not even a product or customers. It’s a high-risk, high-reward model.

The people running massive PE funds or Asset Managers are a different breed of investors, with different goals and different motivations. Let’s pick those apart.

First, these non-traditional investors are not looking for high-risk bets, and don’t expect to earn multiples. They are on the hunt for annual returns from 10% to 15%. That risk preference drives the way they analyze potential investments. They want a company that can deliver solid, reliable returns year after year on its way to the €100 billion valuation. And as companies stay private longer and raise larger late-stage rounds, these NTIs are pushing into these deals to ensure they have a stake in the public companies of tomorrow.

These non-traditional investors will also be more aggressive about protecting their investment, with an eye on further minimizing their risk. They will insist on tighter legal safeguards such as having absolute preference in the case of any shortfalls or failures.

Let’s be clear what this means: Should something go wrong, these new investors are first in line, before founders and previous investors, to get made whole, either through liquidation or conversion of new stock that gives them greater influence and control. If there is down-round valuation at some point, these non-traditional investors will get a whole percentage of their shares back. The founder loses part of the company, maybe even total control.

A traditional VC will fight for a seat on the board to have greater insight into the progress. The non-traditional investor doesn’t care about the day-to-day minutia. They just want to know that you’re hitting your benchmarks.

It’s all about the numbers. And so, founders have to be all about the numbers.

The New Metrics

The first encounter with a non-traditional investor can seem strange to a founder. Whereas previous VC investors conducted thorough audits before investing at late stage, some private equity can conduct equal scrutiny while other asset managers barely glance at the books before committing.

Indeed, Financial due diligence on these companies is performed in a very short time frame and aims at ensuring that the target’s financials are ok per applicable GAAP rules, and that nothing is out of the ordinary course of business. It remains key, but the goal is to clear that as fast as possible.

That’s because they know very well the vertical/segment in which the company operate and conduct preliminary customer reviews before putting out a term sheet.

Also, that’s because their fundamental focus becomes growth going forward. Once they invest, they will be relentless about tracking those numbers. It’s almost like the real due diligence happens after the investment. And it never ends during the company’s journey to IPO.

They want to be sure your company is delivering durable and efficient growth. Durable as revenue growth (eg. ARR, GMV) needs to be demonstrated year on year, with a close monitoring of “growth resilience” to track growth month-to-month or year-to-year, rather than the more general figure of average growth over several years (“CAGR”). Efficient in the sense that Customer Acquisition Costs must be contained per each $ of sale, with a close follow-up of sales efficiency metrics such as the LTV/CAC ratio.

Last but not least, they want tracking of the right growth metrics, those for which revenue is just a consequence.

To help navigate this, a company should identify its North Star Metric, the measuring stick that defines its relationship to its customers. Maybe that’s monthly average users or net promoter score (NPS). Maybe there are several relevant Unit Economics in place to drive toward that goal. One way to tell an entrepreneur is not prepared for life in the late-stage funding lane is that they can’t articulate their North Star Metric(s).

In choosing the right metric, an entrepreneur should ask himself which growth metric would do the most to accelerate its business. For marketplaces and platforms, such as Airbnb or Uber, consumption growth is key. For paid-growth driven businesses, such as Warby Parker, CAC efficiency is key. Actually, a surging lack of CAC control is creating trauma for D2C businesses.

Even a clear grasp of these metrics, the founder must know how exactly the company is going to spend that €100 million it just raised. How will every expenditure help achieve those metrics? It’s almost impossible to imagine how difficult it is to deploy that much capital in a compressed time frame in a way that catalyzes the company’s growth just the way you want. That plan has to include precise measurements of how you acquire leads and transform them into growth. Do you have the correct margins, is the sales team efficient, is the OPEX structure in place to handle the rapid expansion? It’s essential that the metrics are in place to track all of it.

And finally, getting to that €100 billion valuation assumes that you will make acquisitions to add revenue, market share, and consolidate the industry. Not just little acquihires here and there, but substantial deals that add more robust growth. If the underlying business is not solid and measurable, such additions could again just create more mayhem.

It used to be that even fast-moving startups had years in-between fundraising rounds to gradually add the necessary layers, structures, and executive experience to tackle these challenges. But now we see companies raising multiple rounds in a single year, leaving little time for learning or reflection. Instead, founders must make the decision about embracing these new investors in days or weeks.

Having considered all of this and being sure you meet these criteria, then by all means take that money. Just be prepared to put your big-boy pants on. Raising millions of dollars is like driving a car down the highway at 300 km/h. And if you’re not steering the car in the right way, you’re going to crash. When you have this much money, it’s a full-time job to deploy it. You need to know exactly where you are going. This route is only for the entrepreneurs that are extremely clear about their playbook for reaching that 100 billion valuation.

If you want to be a champion, and you want to reach those metrics, and you’re conscious of the risks, and the fact your execution has to be flawless, then definitely grab this opportunity. But if you’re not aware of what sustained high growth means for you and your company, and you’re not sure if your company is fit for growth, then it’s going to be pandemonium.



Raphaëlle d'Ornano

Managing Partner + Founder D’Ornano + Co. A pioneer in Hybrid Growth Diligence. Paris - NY. Young Leader French American Foundation 2022. Marathon runner.