What actually gets a consumer company funded in Europe?

The answer is not a big story, a hot trend or early money coming in. It is how people act. The consumer companies that get funded are the ones that can show people come back, use the product more, tell others about it and make it part of their daily life.

That was the main theme in the first episode of Consumer Tech Napkin, a new series on what matters in consumer tech.

Hosted by Andreas Munk Holm, the conversation brought together Sameer Singh (Partner with Speedinvest's Marketplaces and Consumer team), Susan Lin (Partner and Investor at Felix Capital) and Joe Seager-Dupuy (Director, Investment at True).

The group looked at what gets a consumer company funded in Europe, why the first signs are often about user behaviour, why paid growth can hide weak products and why AI alone is not the edge many founders think it is.

Sameer gave the clearest order of what matters in consumer software: engagement first, then retention, then acquisition and only then monetisation.

For any product with network effects, he said the first thing he looks for is whether engagement per user is going up over time. “That’s the single most important indicator that something is working.”

The point is simple. A good consumer product should get better as more people use it. If that is true, newer groups of users should stay longer, people should use the product more and more growth should come from people telling others about it.

Susan spoke about the same idea through Felix Capital’s view of “customer love”. For her, the question is not just whether a product has users, but whether those users care. That can show up in word of mouth, referrals or a high share of organic growth.

She said that, in the early days, Felix would rather see a company “go deep then broad”, even if that means the first one thousand or five thousand users love the product before it reaches a wider group.

Joe added that investors should look at how the numbers change, not just where they are at one point in time. A big public company will have strong numbers because it already has scale and network effects, so that can be a bad comparison for a young company.

For Joe, the better signal is whether each new group of users is doing better than the last and whether some users are clearly more active or loyal than others.

Pre-seed consumer companies can still raise before launch, but the bar is higher than it used to be.

Joe said founders now have more ways to test an idea early, from quick product mock-ups to basic tools that can help them get feedback faster. Because of that, investors expect more than a deck and a story, unless the company is in a market where regulation or another hard limit makes early testing difficult.

Sameer said there is usually not much reason today for founders not to put a simple MVP in front of users. As he put it, consumer users often do not do what founders expect them to do. Surveys and calls can help, but they can also mislead. “The only real ground truth is behaviour.”

Susan agreed. She said founders do not need to make money from users from day one, but they do need to know what they are trying to prove. That could be engagement, retention or another core metric. The key is that the founder has to learn from real use, not just from what people say they might do.

Joe made the same point from the investor side. Metrics are not only for a fundraising deck. They are a way to check whether the product is working and whether the founder truly knows the customer.

Sameer pushed back hard on the idea that AI is a platform shift in the same way the browser or mobile were. His view is that AI is better thought of as an input inside the product. It can give a product new power, but it does not remove the need to build something people want to use.

He said the mistake is when founders build a thin app on top of a model and treat that as the whole product. If many other companies can use the same model to make the same thing, there is not much protection.

Susan agreed that AI is a huge change, but not the same as a new platform for consumer. The way people find and use products has not changed in the same deep way. She called AI “an incredible enabler” when it is built into a product to make it better, faster or more useful.

Joe spoke about where AI could create real openings, especially in markets where human labour has kept supply low and prices high.

He pointed to areas like therapy, legal services and private wealth management, where software can lower the cost of serving each customer and make the service open to a much wider group. But the same rule still holds: the company has to build a full product. “Just because it’s AI is not enough.”

Susan said consumer has become “a bit of a dirty word” in European venture over the last five to ten years, even though many of Europe’s largest tech outcomes have a large consumer side. She named Spotify, Klarna and Revolut as examples, along with global companies such as Apple, Meta and Google.

Susan added that some of the weak feeling around consumer came from the period when consumer became too linked with e-commerce and direct-to-consumer.

Some of those companies were funded too heavily without enough proof of product-market fit, organic growth, retention or strong unit economics. The lesson is not that consumer does not work. The lesson is that founders and investors need to be clear on what kind of consumer business they are building.

Joe’s view is that consumer looks hard because the power law is even more extreme. More companies may fail, and early investors also need to believe there will be enough capital at Series A and beyond. He said True has been mapping European pre-seed to Series A funds that back consumer and had found about 40, which is low given the number of venture funds in Europe.

That matters because founders may then fly to San Francisco to raise. Joe called that “heartbreaking” for European consumer investors and said Europe should not have to outsource its capital markets to the US.

The conversation also covered paid marketing. Sameer said paid growth is not bad in itself. If a company has a moat and a strong growth loop, paid marketing can help it scale. The problem comes when paid marketing is the main reason the company is growing.

Without a real edge, paid marketing can make early growth look better than it is. Costs may rise as the company grows, and more rivals can enter once the market looks good.

Susan said paid marketing can work when a company knows its user groups, payback and long-term retention. But she also said many companies in the last cycle spent large sums on ads before they had proved those points.

Felix now looks closely at how users are found, how much growth is organic, how long payback takes and how LTV compares to CAC, but Susan said they have become less fixed on one single ratio because the right answer can depend on the product and payment model.

Joe gave founders a clear test. If the unit economics do not work today, what has to change? The company must believe it will get more pricing power, lower its costs, sell more products to the same user or raise enough capital to outlast rivals. If none of those things is true, there is no strong reason to believe the numbers will improve.

The whole discussion came back to one point. A fundable consumer company does not just look good in a pitch. It shows, through user behaviour, that something real is happening.

Watch other parts of the Consumer Tech Napkin series: