2007: random review of a random year



I look at my peers around the industry and I see the tired faces of passionate practitioners who have had an exhilarating but intense year.  In the artisan world of venture investing, there is no scalability beyond the number of hours you can put in the job.  Most of us have seen excellent projects, done exciting investments or accompanied our portfolio companies through a very vibrant market.  Most of us are also email-bankrupt and don’t see our kids enough, yet always feel like we must have missed the next "big one".

Here are some of the key trends I have witnessed this year in Europe:

  • Acceleration of the disruption in digital media: it seems like every aspect of the entertainment and media industry is coming under threat with increasing velocity.  Whether it’s leading editors leaving newspapers to start their own digital publishing initiatives or the free model becoming prevalent in every vertical, disruption is at work and is impacting the industry fast.  I am fascinated to see how difficult it is for the incumbents to react and in fact how ill equipped they are to do anything about it.  Hihgpoint of the year remains the UMG – Wired interview (we are not in the business of technology).  How long before the once mighty media stock are struggling mid-caps ?
  • Talkers of the Big Talk: we all know that the challenge for the European venture industry remains — we need to demonstrate that we can reliably deliver $500m+ exits and some true fund returners.  Buoyed by strong company performance in the current hot market, a lot of VCs have started to talk the talk.  It’s sometimes amusing: "if you cannot deliver 20 to 50X potential to us, we won’t spend any time looking at this deal" or "we only look at companies that have mutli billion dollar potential".   Gimme a break.  Underneath the posturing, a good trend though: most of us would rather own 20% of a company that can return $100M+ to our fund than 40% of the best security company in the South of England.   Believing in the big exit is half the battle.
  • Rise of the (sometimes valuable) me-too:  let’s face it, a lot of Euro startups are well rehearsed replays of US ideas.  No one does it better than the Germans and in particular the Samwers.  From what I understand Oli Samwer wrote his thesis on importing US business ideas to Europe and has not looked back since (even used my ETT slides after a nifty logo change :-().  But guess what, with deep domestic online markets you can build some really valuable businesses these days.  These leads to some fairy impressive quick flips such as StudiVZ or MyVideo.de.  Some should have been allowed to run (Studi apparently is on to 5bn PVs a month !!) but there is no disputing the multiples.  the Samwers are not alone, folks like Oliver Jung, Lukasz Gadowski or Christophe Maire are hard at work building these up.
  • Advent of the celeb angel: in a trend imported from the US, trusted angel groups have started to form circles of trust and fund companies together with great regularity.  In the one corner I give you Hommels – Klein – Atomico and pals, in the other Varsavski – LeMeur – Ohayon and co etc.  Funnily enough all of the leading funds have one angel on side (with varying degrees of independence: Index has Klein Jr, Balderton has Hommels, Atlas has Klein Sr.
  • Move to the Late Stage Eldorado:  What do you do when you are a succesful early stage investor ?  Easy – increase your fees by raising bigger funds.  Hence an announced move by a number of players away from pure early stage roots to either the (yawn) Barbell strategy (mixed early and late stage in same fund) or the raise of a dedicated late stage vehicle.  Hence you will see Accel beating TA and Summit to a deal, Balderton plonking big checks into Setanta, 3i retreating away from early stage or Index Ventures raising a separate vehicle with Dom Vidal.  Kennet Ventures, a discrete fund with strong historical performance, and Fidelity Ventures are getting some serious company.
  • New entrants facts and rumours:  Of the US funds, VantagePoint and Highland made the move (nice to have Fergal and Irina around).  DFJ made a move on Esprit – or vice versa.  Sequoia Capital has been looking and may well be sniffing again, Bessemer and Battery keep doing the occasional deal, and others are rumoured to be looking at setting up ops (Doll and Granite have been mentioned, no hard facts).
  • (Continued) gobalisation of venture capital:   it used to be that you would start a company in Europe and move your HQ to the US as fast as you could, because breaking the US market was how you would turn yourself from being a $100M success into a $500M+ success.  This in fact was the early trademark of Atlas, dating back to the mid 80’s, leading to successes like Business Objects, iLog, Spotfire and others.  Whilst we still have a number of companies being built on that model and doing it well (say Kalido or Globoforce), the game these days is much more exciting.  Take Ubiquisys: it’s got a number of operator trials, but all of these are in Asia and Europe.  Or RealEyes3D: from early days in Paris, it is selling in the Bay Area, Japan and Korea.  Or Icera: its first product is shipped in Japan with Softbank and its first major deal was with Belgian card manufacturer (and world leader) Option Wireless.  Being global from day one got a lot more complex, but also more open to smaller businesses.  Add to this the explosion of venture capital in China and India,and you have a picture of the venture world that properly reflects the richness and diversity of a  global capital market.  This is partly why we (Atlas) have always kept a global, integrated fund.
  • Change at the top: Have you seen people rushing towards Microsoft to escape the embrace of Google?  The mounting wave of eBay backlash ?  The failure of Google at reinventing itself ?  The industry taking aim at iTunes ? Stay tuned for continued change in the pecking order at the top of the web world.

Now for a little exercise of Wired / Tired / Expired:

Wired

Index Ventures new website (ok, maybe trying too with all the rounded edges, but nice !)
The Accelerator Group
Harry Nelis (one huge one to be disclosed + Kayak, Onforce, GameForge !)
DailyMotion (top 40!!)
blog.pmarca.com
Elf Yourself (wink Fred Wilson)
Floppy Disks

Tired
Entrepreneur: "We have an open API strategy" – VC: "Fine, but what’s your widget strategy ?"
"We have an invite a friend function — we’re very viral you see"
You absolutely must join "xxx"  (spock, tumblr, jaiku, dopplr, twitter,  rapleaf,  fredstr … )
XCamp (BarCamp, FooCamp, FundCamp, FredCamp) … all except Seedcamp !
Blogger < a href="/2007/12/user-generated.html">bitchfests

Expired

Facebook apps
Facebook local me-toos
Facebook vampires
Facebook charities
Complaining about Facebook
Facebook ?

My messages for 2008:
– LESS IS MORE (read TC)
– Signal to Noise ratio matters
– Real-time is a distraction from substance


My Man of the Year: Robin Klein at TAG

http://www.fizzback.com/upl/Image/people/robin.jpg<— a great lover of entrepreneurship and the quiet force behind the UK ecommerce innovation scene
– Bankrolled Seedcamp
– Exited Agent Provocateur to 3i for £60M
– Chairman of Lovefilm, Koodos and others
– Continued building his exciting e-commerce portfolio which includes Stardoll, Spotrunner, Daylife, Koodos, Moo GlassesDirect, Imagini and many others


Deal I wished I had done this year

[wonga.gif]<— damn it errol, why did you not come and speak to me !

And finally …

Y’all have a Great Christmas or Holidays and I will see you in 2008 !!


Courtesy Image Editor

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3 Responses to 2007: random review of a random year

  1. Sean says:

    Great wrap-up Fred, thanks. Especially helpful for us VC outsiders. ;) I now have a new goal: to make sure sixth paradigm is on your 2008 ‘Wired’ list!

  2. Frank P says:

    Wonga marches on – this sector keeps growing.

  3. I am looking forward that this Christmas giving me great opportunity to be with my good friends and my whole family as well.