Monday, June 18, 2007

2006 Early Stage VC into European Web 2.0

From Paul Fisher blog 2006 Early Stage VC into European Web 2.0:

Ecosystem 2.0

European politicians should be delighted that we have a thriving entrepreneurial ecosystem which they have been attempting (hoping) to build to compete with the USA, principally the West Coast.

Interestingly, this ecosystem is not centering on the Universities or the government sponsored funds.

It is instead the Silicon Valley model of second time round entrepreneurs, experienced business angels and VCs who have already been through a few cycles.

Looks good if it can be kept up.

Lal

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Saturday, June 16, 2007

Beware of VC data being reported in EU and the "little details"

In a previous post on VC funds in EU on the Up (May 2007) I looked at a blog posting from Alarm:clock regarding a Financial Times who reported on research from Paul Fisher on Web 2.0 and Internet investments in the European region in 2006.
and how the ..The growth is remarkable. 

Nic Brisbourne (Esprit VC outa London/Cambridge) has an article "Lies, damm lies and venture statistics" that looks at more recent figures from the EVCA in more depth.

The opaque world of venture capital isn’t helping itself with the way stats are being presented at the moment. The EVCA (European Venture Capital Association) released data last week which is a little confusing in the way it categorises different types of private equity and venture capital investment.

As a result the FT this morning ran an article under the heading Europe venture capital shows big rise that is misleading, at least according to my definition of venture capital. The article leads with the following paragraph:
Europe’s venture capital market recovered sharply last year as money raised by funds investing in start-ups and early stage companies rose 60%

When I read a sentence like that my immediate assumption is we are talking about technology venture capital - not so. If you look to the underlying EVCA data it shows that funds raised in “Venture high-tech” declined last year from €5.1bn to €5.0bn. There was massive growth in “Venture non high-tech” which gives rise to the 60% figure above - but that is not really relevant to what we are about at Esprit and I imagine most of you are about in your day to day jobs.

The FT article also makes much of the statistic:
The average internal rate of return over the life of all venture capital funds since 1980 until the end of last year was 5.5%

I have a couple of points to make in response to that:
  • Venture capital has always been a business where the top quartile of funds make a good return and the rest don’t so quoting the average without quoting the top-quartile returns doesn’t give a true picture. According to the EVCA data the top quartile returns for all venture were 17.4% and for balanced venture funds (which is what we are) it was 23.5%. (Note that EVCA returns stats don’t break out tech and non-tech venture. These percentages are for all venture and need to be treated with care.)
  • The European venture industry is still young - there simply wasn’t much money invested prior to the dotcom bubble and unfortunately most of that was raised in 1999 - ie too late to make hay while the sun was shining. Post bubble times were hard and funds raised declined, so the “all venture funds since 1980″ stats are weighted towards the crazy period of 1999-2001 and thus a little misleading.

We are working towards trying to pull together some better data, but progress is slow as we suffer from the hours in the day problem.

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Irish StatCounter man -Aodhan Cullen- in the Top EU 2007 Young Entrepreneurs

BusinessWeek has an article on Europe's Young Entrepreneurs 2007 and Aodhan Cullen (24) is one of nominations for those entrepreneurs under 25.

He runs StatCounter from Dublin, Ireland = A free yet reliable invisible web tracker, highly configurable hit counter and real-time detailed web stats.

Aodhan Cullen calls himself a born entrepreneur.
He has been running businesses since the age of 12, when he set up his own résumé-typing business. As a young teen, he dabbled in Web site design, and it was this experience that gave him the idea to launch StatCounter, the
company he founded in 1999 when he was 16. When Cullen started designing Web pages, his clients repeatedly asked him whether anyone was visiting their Web sites.

So, Cullen formed StatCounter and came up with a way to measure the number of hits on Web sites, the geographical location of visitors to sites, the various pages a visitor views on a site, and the keywords they use to find a site.

StatCounter currently has more than 1.4 million members and tracks more than 9 billion page views per month across its network of more than 2 million Web sites. The company, which is profitable, claims to be signing up 1,500 new members per day.

Over 100+ congrats on his blog and over 500 that are voting for him.
Note from Aodhan ..



one comment 
Done, and done! Excellent work - very useful utility. Hope Google buys you for $27 million…
another
Statcounter is the best counter out there. I tried many and am very happy with it
.


Good on yah! - Vote here (Note: its the first captcha  that I've seen that is Caps sensitive!)


Lal

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Wednesday, May 23, 2007

Irish VC Investment Slackens- Q1 2007

from FinFacts
Irish Venture Capital plunged to €4.2 million in Q1 2007;
European Venture Capital flattened


Coming off the strong growth made in 2006, venture capital investment into European companies flattened in the first quarter, with €1.07 billion invested in 207 financings, according to the quarterly European Venture Capital Report released by Dow Jones VentureOne and Ernst & Young. Compared year-on-year, both capital and deal flow decreased 11% from the first quarter of 2006.


Irish Investment Activity Slackens
In the first quarter, €4.2 million in venture capital was invested in young innovative firms in Ireland, significantly down from €26.3 million in 4Q’06 and the €28.6 million invested in 1Q’06. Only one deal was completed in 1Q’07, down from 4 deals in 4Q’06 and 7 in 1Q’06.


“The Irish market is quite small, therefore quarterly numbers need to be treated with caution as they can be skewed by cyclical patterns and by the small number of deals. More meaningful data should emerge with respect to the underlying trend for 2007 as we complete the second quarter” said Garry O’Rourke, Transaction Advisory Services Director at Ernst & Young in Dublin.

There were no seed, first or second round deals in 1Q’07, which represents a decrease from 3 deals in 4Q’06 and from one deal in 1Q’06. A single later stage deal was completed in 1Q’07, just as in 4Q’06, compared to 5 in 1Q’06, raising a total of €4.2 million compared with €2.6 million in 4Q’06 and €27.4 million in 1Q’06.

No investments were made in the healthcare sector in 1Q’07, compared with two deals in 4Q’06 and a single deal in 1Q’06.

There was only one IT sector deal closed in 1Q’07, just as in 4Q’06, although this is down from the 7 deals in 1Q’06. The amount invested totaled €4.2 million in 1Q’07, an increase from €2.6 million in 4Q’06 but significantly down from €28.6 million in 1Q’06.

There were no exits in 1Q’07, compared to the two exits in both 4Q’06 and 1Q’06.

Ireland ranked fourteenth in Europe in terms of the number of deals, level with Poland, Romania and Italy, but behind Russia and Austria. Ireland was fifteenth in terms of amount raised, behind Austria and Italy but ahead of Poland and Romania.


European Investors Focusing on IT
The first quarter found investors renewing their interest in information technology, which showed signs of a significant comeback; there were 9% more deals and 6% more capital invested in this industry than in the same quarter a year ago. In addition, later-round financings were at their highest point in a year and second round financings also showed significant growth. Another positive sign, according to the report, was that median round sizes across all industries improved upon last year’s increases to reach the highest point on record at €2.7 million overall.


“The continued growth in round size, especially in second and later rounds, indicates that investors are providing the most promising portfolio companies with the resources needed to progress along the path to exit," said John de Yonge, Global Research Director of Ernst & Young's Venture Capital Advisory Group.

"Last year saw the most venture-backed initial public offerings in Europe in six years and steady acquisition activity. Investors are focusing greater capital and attention on the subset of companies with the most potential to take advantage of the supportive exit climate in the near term."


Later Rounds Dominate Activity
Forty percent of the rounds in the first quarter were later-stage rounds, the largest percentage since 1999. In addition, the €606.7 million directed to the 83 later rounds was the most capital invested in this round class in a year and represented more than half of all capital invested in Europe in the first quarter. Capital investment into second rounds also showed a significant quarter-on-quarter increase, growing 21% to €257.1 million. The median size of second and later rounds is now €3 million and €3.5 million, respectively.

Seed- and first-round financings, meanwhile, made up 37% of the deal flow in the first quarter but only 19% of the total investment.

Round allocations varied by industry. Healthcare financings in the first quarter were particularly dominated by later rounds, which made up 55% of the deal flow activity to this industry. Conversely, information technology saw more early-stage activity with seed- and first-round deals representing 41% of financings.


Information Technology Posts Significant Growth
Information technology had the most significant upturn of any industry in the first quarter, according to the report. In total, €550.2 million was invested in 133 technology deals, representing €30.1 million more in capital and 11 more deals from the first quarter of a year ago. The software and information services segments showed the most activity for the sector. Software deals increased by 20% over the same period a year ago to 73 and investment increased11% to €222.5 million. More dramatically, deal flow in the information services segment increased 131% to 30 deals, and capital increased more than two-fold to €114.7 million.

“The emerging interest in Web 2.0 technology—which is mostly focused in the information services segment—seems to be fueling this growth in European technology investments,” said Jessica Canning, Director of Global Research for VentureOne. “In addition, the number of IPOs for information services companies doubled over the past year and this is likely a factor in investors’ preference for the segment this quarter.”

European venture capital investors also invested more in energy companies, according to the report. There were 10 energy deals in the first quarter, only slightly more than the nine that occurred in the same quarter of 2006; however the capital invested in this segment more than doubled to €58.6 million.

The healthcare industry in Europe was more constrained in the first quarter, the report found. The 38 healthcare deals and €387.8 million invested here represented declines of 42% and 19%, respectively, from the first quarter of 2006. Nevertheless, the €50 million second-round investment in antibacterial company Novexel of France was among the largest deals of the first quarter.


Lal

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Web 2.0 VC Dealmaking On The Upswing in UK/EU

From alarm:clock euro::
"Europe can do well if we learn to live with the losses. Some companies will fail. In the US, when that happens, people say ‘hey, we tried’ and start again, but in Europe people remember the failures more readily than the successes.”




Today the Financial Times has a report inspired by fresh research from Paul Fisher of First Capital on Web 2.0 and Internet investments in the European region in 2006. It reports the amount raised last year jumped to more than £144M (about €219M). It also has commentary from active online service investors, such as Barry Malone of Benchmark Capital who talks about the "spray and pray" approach to investment and Fred Destin who talks about what it will take for Europe to grow.


Fisher posted the original data on his blog along with some good analysis, and created a good table showing all the deals in question. He writes:
More than £144mn was raised in Europe across seed and first rounds in 2006 by 54 European web2.0 companies. This total doesn’t include the “undisclosed investment” rounds, of which there were 16.


The growth is remarkable.

In the UK in 2005, just £24mn was invested into web2.0 companies. In 2006 that figure increased threefold with £79mn worth of early stage investments into 21 companies.

The FT's article is currently not behind its firewall, so you can read it now. Here are some quotes from Benchmark's Malone:
These [Web 2.0] companies are also much cheaper to set up than other technology businesses.

"It is very difficult to build up a semiconductor company or an enterprise software business. You need to invest $40m to $50m before you know if you have a product that works," Mr Malone said. "With web 2.0 companies you can find out after three or four million dollars whether it will work."

As a result, Mr Malone said, many European venture capital companies were using a "spray and pray" strategy, spreading small amounts of investment over dozens of companies in the hopes that two or three would make it.

Just in case you think Barry doesn't know what he is talking about -
Prior to joining Benchmark, Barry spent five years as CEO of Esat Digifone, Ireland's second largest GSM mobile operator. Under Barry's leadership, Esat Digifone expanded to a profitable company with 900 employees, more than 1 million customers and IR400 million in revenues. Esat Digifone was acquired by British Telecom at a market value of IR£2 billion and is now part of the O2 Group.

Before Esat Digifone, Barry spent two years at Xerox Corporation in Palo Alto, California, where as Vice President of first Business Development and then Channel Operations, he was instrumental in revolutionizing Xerox’s approach to global marketing. Before this Barry enjoyed a pan-European career at Digital Equipment as European Pricing Manager, Director of Software Business Europe and Vice President of the Component and Peripheral Business Unit Europe.

Previously looked at Enterprise Irelands 2006 startups and mentioned FinFacts current report on economy and investments etc.. - not good reading.
Only six jobs were created in the €110m Information Age Park Ennis (IAPE- Shannon Development) in the past 12 months...
Professor Danny Breznitz of the Georgia Institute of Technology says our research infrastructure is too narrow in its focus and may not be sustainable...not creating enough new businesses,...
......GEM...found the percentage of people who were either thinking of going into business or had just started a new venture slid substantially in Ireland...

Also posted about Irish VC Investment slackening in Q1 2007
Only one deal was completed in 1Q’07, down from 4 deals in 4Q’06 and 7 in 1Q’06.
There were no seed, first or second round deals in Q1
There was only one IT sector deal closed in 1Q’07, just as in 4Q’06, although this is down from the 7 deals in 1Q’06.
There were no exits in 1Q’07, compared to the two exits in both 4Q’06 and 1Q’06.
Ireland ranked fourteenth in Europe in terms of the number of deals
,

Mentioned goverment subsidies and views in a previous post.
Bridges Ventures..VC group.. invest in deprived parts of the UK... make its 27th investment

Bridges raised £40m for its first fund, including £20m from the UK govn... as well as private equity executives ..and 3i. But its second fund of £50m had no government money.

 micro financing may look unattractive to many VCs ... claims his funds are outperforming the rest of the VC market.

Also mentioned some views on angel/VC investing from EU Innovate conference.

So it will be interesting to see how Ireland does over 2007 as so far it looks sloooow, besides MapFlow.


Lal

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EU VC: What have we learned?

From Paul Fisher's blog-European Venture Capital: What have we learned?:

"I think that the European VC scene is a notably better place and that THNGS ARE GETTING BETTER ALL THE TIME.

The ecosystem for entrepreneurs is getting better: from uni spin-out hubs & clubs to booze fuelled dinner table debates.

The quality and segmentation of investors is getting better; from international success-stories like Index to small, ultra focussed funds like Eden Ventures.

The DIALOGUE is getting better;
I doff my cap to initiatives like open coffee club which fosters mutual understanding.
I believe VC –entrepreneur relationships are far less adversarial and far more informed than they were 8 years ago. (Fred has a nice angle on this too)"

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Anyone apply for Top 15 EU Startups competition?

(OOPS - this one got stuck in the Web2Ireland blog Drafts Q :(    )

Anyone know or enter for this?
Deadline was by May 2nd, and happens on May 10th in Madrid.
I found it via Richards post on ReadWrite

StartUp2.0 is a competition of European web 2.0 sites whose objectives are to promote and reward the European startups (either created or willing to do so in the future) that work in the field of 2.0 technologies.

The Irish boys not up 4 this and fancy a trip 2 Spain (with cheap RyanAir flights) ?

I see our man Tom is on the panel...

Should EI or someone be keeping a 'diary of relevance' for Irish startups?

Fergus gave a mention earlier

Lal

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Tuesday, May 22, 2007

Mobile tech panel at Innovate EU 2007

Rudy De Waele has another follow-up from the panel on Mobile technology at the Innovate EU 2007 conference in Zaragoza.



Moderated by the illuminated Thomas Crampton, another interesting panel on Mobile technology followed after the break with Scott Cooper, VP Mobility Solutions at Nokia; Augustín Núñez Castaín, Handsets & Services Innovation Director at Telefónica Móvilés España and Avi Shechter, CEO of Fring. Some notes on that panel:

- big intersection between web 2.0 conversations and being present in a network/community, this model comes now to mobility
- next generation mobile services will be monetised in different ways
- roaming call from Helsinki to NYC and back: roaming cost 2, 45 $ while through wi-fi 0,04$ (!)
- UGC (User Generated Content) is really changing the face of society
- it’s all about the value created around the ecosystem
- remember Google & Yahoo are not FREE, it’s a different way of paying, of collecting money from users
- new ways to collect money will arise, like targeted advertising, personal profiling, added-value services
- rich presence services - it’s the blend of technology and individual content creation
- right time to open up and have the right tarification plans for early adopters
- people want to pay for a good mobile service
- upload of personal content will become the next wave (personalisation, tuning of music, uploading your life with pictures, video…
- as for the operator: it’s a matter of where to put and manage the bandwith and how to garantuee a seamless integration for our users…
- sharing personal content, user-generated content
- adapted TV programs, still a need to find the right broadcast solution
- explosion of new buisness models will come, the opportunity for the operator is that it has the user’s trust
- there will be low-cost carrier and low quality but also room for high quality servcies, connectivvity, device managemenent, storage for contents, handset replacement, entreprise applications, etc…
- related to mobile 2.0 startups in need to connect to operators: operators have the experience, the support and the billing experience


Lal

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Innovate Europe 2007 Wrap-Up and Angels/funding

Rudy De Waele has a summary (just copied his part of Angels/funding in EU) from the Innovate Europe 2007 Wrap-Up

Power Angels panel, composed of:

* Klaus Hommels, Venture Partner, Benchmark Capital
* Oliver Jung, Investment Manager, Adinvest
* Saul Klein, Venture Partner, Index Ventures
* Simon Levene, Partner, Accel
* Mark Tluszcz, Managing Partner, Mangrove Capital Partners

Here my rough notes from that session:

- 20 relevant vc’s and 20 angels in europe
- 30 investments last year, diversification (oliver)
- a lot less opportunities in EU then elsewhere
- just less deals in EU
- too much advertising as biz model for tech startups, Oliver likes to see more real pure business models build on revenues
- 50% funded seed companies will not survive
- too many companies on to few opportunities
- more people starting companies then people joining companies
- great talent pool in europe
- great examples serve as role model
- first 50 people building a team are fundamental!
- need more people joining teams than starting companies

Conclusion: it’s all about smart entrepreneurs and passionate people


Lal

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Sunday, April 29, 2007

More stuff 2 blog about

Like last post this is also a follow-up from here

Links that prompted me 2 blog later about.
Lots of stuff as usual, Ireland, Enterprise Ireland, Startups, techie stuff, BarCamp, Funding, VC's, Angels, govn bodies, etc..

(Ya follow that?)




Lal

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