Europe's push for start-ups
Saturday, 8 September 2007
Jonathan Guthrie
An idea that Europeans are hopeless at high-tech start-ups has taken root alongside older stereotypes of humourless Germans, food-obsessed Frenchmen and sexually repressed Britons. Europeans gaze longingly at the US, where geeky technologists set up big cutting-edge businesses such as Google, Ebay and YouTube, apparently without effort. "Why can't we do that?" mutter politicians and academics.
Saul Klein, a UK-based British ven-ture capitalist and entrepreneur, believes Europeans can, by putting in some extra ground-work to compensate for national barriers and risk-averse cultures.
Mr Klein, a co-founder of the Lovefilm online movie rental business, is doing some groundwork himself by setting up Seedcamp, a week-long series of masterclasses for high-technology businesses from across the European Union. They start on Monday in London, with highlights covered in the Financial Times and on FT.com.
Mr Klein, a venture partner at Index, the Silicon Valley-based in-vestment business, says: "We want Seedcamp entrepreneurs to build the next Google. We want European kids to believe they can succeed - from Riga, Istanbul or Hertfordshire."
The 20 participants have been chosen by a panel of venture capitalists from about 270 start-up teams from 40 countries. They will get free advice from successful entrepreneurs, professional advisers and executives from Oracle, Google, Yahoo and Microsoft. On Thursday the teams will pitch for investment to the venture capitalists, which include names such as Index, Balderton, Atlas, Accel and DFJ Esprit. Five winning start-up teams will receive €50,000(£34,000) each. They will stay in London for a further three months, participating in technology demonstrations and presentations to investors.
The barriers facing start-up evangelists in Europe such as Mr Klein are formidable. The region starts from a low base in investment terms, with venture capital of just €6.4bn committed in 2006, compared with about €20bn for the US, according to Library House, a venture capital data provider.
The lack of investment partly reflects the unfamiliarity of European institutions with venture capital and the attractions of private equity. "They have been fixated on big leveraged buy-outs, like rabbits frozen in the headlights of a car," says Jean Marc Patouillaud, a -Paris-based partner at Partech International, a Paribas spin-off headquartered in San Francisco.
Low economies of scale deter some investors, because small, high-tech companies require only a few million euros in capital at a time. Returns have also been poor, reflecting feverish fundraising before the dotcom bubble burst, and a hangover afterwards. "People bought at inflated prices and spent money on some business models that simply did not make sense," says Björn Stray, a general partner with Northzone Ventures, with offices in Oslo, Stockholm and Copenhagen. But he says EU venture capitalists will gain better brag-ging rights as returns from the 2002-2005 investment round start feeding into five-year figures.
Ohad Finkelstein, head of international investment at Venrock, a US investor that backed Intel, Apple and 3Com, believes European institutions can be too impatient: "Venture means risk. But in the EU a lot of companies do not get the second - or third - round funding they would in the US."
London has shown promise recently both as an incubator and as a service centre for European high-tech start-ups. The media hype is of hip young people who spend their days building disruptive websites in East End lofts and their nights partying. A more sober view is that London has a pool of bright, cosmopolitan workers and boasts the European outposts of severalSilicon Valley-based venturecapitalists.
The financial muscle of the City of London is one reason the UK accounts for the lion's share of venture capital investment committed in Europe.
British companies won €2bn in investment in 2006, according to Library House. France, thanks partly to tax breaks for unquoted investment, won €840m. Israel was close behind. Europe-based venture capitalists ignore the fact that it is not officially European because it has great technologists and entrepreneurs. "Israel lives on the edge so its people are comfortable with risk-taking," says Mr Finkelstein, who splits his time between London and Tel Aviv. Germany came fourth, with €460m in investment.
One of the sillier calumnies perpetrated against the European high-tech start-up scene is that there is a lack of role models. Yet Europeans have founded some big, fast-growing businesses. The UK has fostered Lastminute.com, the travel retailer, Skype, the internet telephony company and Last.fm, the web-based radio station. France has Kelkoo, the online comparison site, and Meetic, the internet dating agency. Germany's Samwer brothers created then sold Alando.de and Jamba, an online auction site and a ringtone business.
With a pleasing circularity, footloose Americans based in Europe could be among the entrepreneurs who bolster the continent's high-tech credentials.
US expatriates are adding flavours to the melting pot. One is Eric Baker, whose Viagogo ticket auction website has attract-ed $50m (£25m) from high-profile investors such as Brent Hoberman, Bernard Arnault and Jacob Rothschild.
Mr Baker hopes to replicate the success of StubHub, a US ticket re-- sale business he helped start, that sold for $310m to Ebay this year. "The field has become much more international and there are vibrant ecosystems outside the US," he says. "You need a pool of entrepreneurial collaborators, local role models and access to capital. All three factors are coming tog-ether in London and across Europe."
An idea that Europeans are hopeless at high-tech start-ups has taken root alongside older stereotypes of humourless Germans, food-obsessed Frenchmen and sexually repressed Britons. Europeans gaze longingly at the US, where geeky technologists set up big cutting-edge businesses such as Google, Ebay and YouTube, apparently without effort. "Why can't we do that?" mutter politicians and academics.
Saul Klein, a UK-based British ven-ture capitalist and entrepreneur, believes Europeans can, by putting in some extra ground-work to compensate for national barriers and risk-averse cultures.
Mr Klein, a co-founder of the Lovefilm online movie rental business, is doing some groundwork himself by setting up Seedcamp, a week-long series of masterclasses for high-technology businesses from across the European Union. They start on Monday in London, with highlights covered in the Financial Times and on FT.com.
Mr Klein, a venture partner at Index, the Silicon Valley-based in-vestment business, says: "We want Seedcamp entrepreneurs to build the next Google. We want European kids to believe they can succeed - from Riga, Istanbul or Hertfordshire."
The 20 participants have been chosen by a panel of venture capitalists from about 270 start-up teams from 40 countries. They will get free advice from successful entrepreneurs, professional advisers and executives from Oracle, Google, Yahoo and Microsoft. On Thursday the teams will pitch for investment to the venture capitalists, which include names such as Index, Balderton, Atlas, Accel and DFJ Esprit. Five winning start-up teams will receive €50,000(£34,000) each. They will stay in London for a further three months, participating in technology demonstrations and presentations to investors.
The barriers facing start-up evangelists in Europe such as Mr Klein are formidable. The region starts from a low base in investment terms, with venture capital of just €6.4bn committed in 2006, compared with about €20bn for the US, according to Library House, a venture capital data provider.
The lack of investment partly reflects the unfamiliarity of European institutions with venture capital and the attractions of private equity. "They have been fixated on big leveraged buy-outs, like rabbits frozen in the headlights of a car," says Jean Marc Patouillaud, a -Paris-based partner at Partech International, a Paribas spin-off headquartered in San Francisco.
Low economies of scale deter some investors, because small, high-tech companies require only a few million euros in capital at a time. Returns have also been poor, reflecting feverish fundraising before the dotcom bubble burst, and a hangover afterwards. "People bought at inflated prices and spent money on some business models that simply did not make sense," says Björn Stray, a general partner with Northzone Ventures, with offices in Oslo, Stockholm and Copenhagen. But he says EU venture capitalists will gain better brag-ging rights as returns from the 2002-2005 investment round start feeding into five-year figures.
Ohad Finkelstein, head of international investment at Venrock, a US investor that backed Intel, Apple and 3Com, believes European institutions can be too impatient: "Venture means risk. But in the EU a lot of companies do not get the second - or third - round funding they would in the US."
London has shown promise recently both as an incubator and as a service centre for European high-tech start-ups. The media hype is of hip young people who spend their days building disruptive websites in East End lofts and their nights partying. A more sober view is that London has a pool of bright, cosmopolitan workers and boasts the European outposts of severalSilicon Valley-based venturecapitalists.
The financial muscle of the City of London is one reason the UK accounts for the lion's share of venture capital investment committed in Europe.
British companies won €2bn in investment in 2006, according to Library House. France, thanks partly to tax breaks for unquoted investment, won €840m. Israel was close behind. Europe-based venture capitalists ignore the fact that it is not officially European because it has great technologists and entrepreneurs. "Israel lives on the edge so its people are comfortable with risk-taking," says Mr Finkelstein, who splits his time between London and Tel Aviv. Germany came fourth, with €460m in investment.
One of the sillier calumnies perpetrated against the European high-tech start-up scene is that there is a lack of role models. Yet Europeans have founded some big, fast-growing businesses. The UK has fostered Lastminute.com, the travel retailer, Skype, the internet telephony company and Last.fm, the web-based radio station. France has Kelkoo, the online comparison site, and Meetic, the internet dating agency. Germany's Samwer brothers created then sold Alando.de and Jamba, an online auction site and a ringtone business.
With a pleasing circularity, footloose Americans based in Europe could be among the entrepreneurs who bolster the continent's high-tech credentials.
US expatriates are adding flavours to the melting pot. One is Eric Baker, whose Viagogo ticket auction website has attract-ed $50m (£25m) from high-profile investors such as Brent Hoberman, Bernard Arnault and Jacob Rothschild.
Mr Baker hopes to replicate the success of StubHub, a US ticket re-- sale business he helped start, that sold for $310m to Ebay this year. "The field has become much more international and there are vibrant ecosystems outside the US," he says. "You need a pool of entrepreneurial collaborators, local role models and access to capital. All three factors are coming tog-ether in London and across Europe."