Sequoia closes it’s London office

Recently, Sequoia announced that they will be closing their London office and several members of the team will be leaving the company albeit their extraordinary performance to date. Some of the European companies they have back include n8n, Stark, ineffable, RobCo, ElevenLabs, Edra, Klarna, etc. The rationale behind the move is that Sequoia understands that in order to continue identifying, investing, and supporting outlier founders, it must reinvent itself to focus on things that moves the needle.

I’m sure they will continue to thrive given the caliber of the team. But the more important question is how will this affect existing and incoming startups from Europe?

Based on a study by the European Commission’s Joint Research Centre, about 3% of European VC-backed startups relocated their headquarters abroad, as opposed to just 0.3% of comparable non-VC backed startups. Of these figures, roughly three-quarters of all relocating startups move to the US to key hubs like San Francisco (who would have thought?), New York, and Boston (European Commission JRC, 2026). I foresee more founders moving across the pond but it depends on the future political and regulatory landscape in the US with the underlying catalysts remaining the same - structural drivers, and performance outcomes.

So, how do these two components look like in reality?

Europe continues to face gaps in later-stage financing, limited exit opportunities, and the single-market regulatory fragmentation that exist in Europe (European Union Single Market). In 2018, McKinsey analysed 1000s of Europe’s top startups, and estimated that reaching unicorn status would require between €100 million to €200 million in funding, and a ten-year time horizon. That’s a massive amount for sure. Quas et al. (2022) argues that only a few EU-based venture capital firms are able to provide massive capital injections to startups, further noting that financing is less developed in the region than in the US. Based on the data by Dealroom, the ratio of later-stage investment in total funding is 81% in the US as opposed to only 74% in the EU in the first quarter of 2021.

Well, that was five years ago but it still stays true today. Based on ECB’s May 2026 analysis, US venture capital firms hold about €930 billion in total fund capital in contrast to around €150 billion for EU-based funds, a sixfold difference. To add fuel to fire, the ECB corroborates that the financing gap becomes more evident at the later stages, when companies seek to raise a larger fundraising round for international expansion. The situation is further worsened given the smaller institutional investor base in Europe, especially the limited participation of pension funds, which limits the availability of large pools of long-term risk capital.

So, is relocating any good at all?

According to a research published by the European Commission in September 2026 titled “International Migration of European Startups: Magnitude, Drivers, and Outcomes, co-authored by academics including Anita Quas, Bogdan Tofan, and Massimo Colombo found that European startups moving to the US raised more funds and had a higher chance of achieving a successful exit. Relocation also enabled the startups to grow their sales a lot faster, and boost labour productivity while having their base in Europe.

This doesn’t suggest that startups are abandoning Europe; rather founders choose to establish their headquarters closer to customers, investors, and potential acquirers in the US while retaining their R&D, engineering, and other operations in Europe. From a startup’s perspective, this can be reasonable strategic decision. From Europe’s perspective though, it raises the question: if European companies need to relocate to access the resources needed to scale, how much of the value created will eventually remain in Europe?

Since later-stage funding rounds are fulfilled by US venture firms, European venture funds will divert their focus on early-stage funding. Subsequently, Europe will have to compete with other local venture firms to identify and back outlier founders if they want to enjoy the valuation arbitrage of their portfolio companies raising later-stage rounds from US firms.

I think Sequoia closing down their London office will force other venture firms to rethink the way they operate their funds. Overall, this will be good for the venture funding ecosystem.

References