Entries in white bull (4)


Running with the Bulls in Barcelona, Part 1

White Bull, Pathways to Exit

In the last two to three years, Europe, and especially the UK, has seen an explosion of initiatives in the technology start-up space. Inspired by Rob Conway’s Y-combinator and Brad Feld's Techstars in the US, accelerators such as Springboard and start-up competitions such as Seedcamp have been helping entrepreneurs all over Europe and beyond.  

All good stuff, but there is also a need to support the "gazelles", or the very high growth potential companies that have made it through the first two-three years and now have proven products, traction, revenue and, in some cases, even profits. This is precisely the market White Bull addresses. Its mission is to help the growth stage companies of the European Technology, Media and Telecoms (TMT) sectors and champion the European innovation ecosystem.

The UK's Global Entrepreneur Programme has been working with Elizabeth and Farley Duvall, WhiteBull founders, to support this mission. Over the last few months colleague Tony Kypreos and I have helped run the Tech Entrepreneur series to meet these entrepreneurial companies and key stakeholders in six cities around Europe: London, Stockholm, Amsterdam, Paris, Berlin and Tallin. The White Bull, Pathways to Exit summit in Barcelona was the grand finale of a year’s worth of scouting and screening.

Day one of the summit started with a tour of 22Barcelona, the local equivalent to our Tech City in East London. A large area of the city, near the centre but in need of regeneration, is being redeveloped to house tech start-ups and large companies as well as universities and people. Cleverly, developers were granted planning permission in exchange for giving 30% of the land back to the City who are using it for affordable housing, universities and open spaces. The result is an attractive and colourful mix of eclectic modern architecture, revamped factory buildings and green spaces with good transport links to other parts of the city. Just as there are many accelerators focused on the start-up space in Europe, so are there government-led economic development initiatives targeted at the tech sectors.

In the afternoon’s Bullpen session, 12 companies received feedback and coaching on their presentations ahead of the main event from industry experts including Jeff Coe (Linden VC), Ashley Ward (European Leaders), Tony Kypreos (, Paul Cautracasas (Aquaa Partners) and John Paty (independent investor).

In the morning Farley Duvall set the scene for the next two days: a marathon of 31 company pitches and eight keynotes/panels with only short breaks for coffee and lunch. I will cover the keynotes and panels in this post, the company pitches in the next. Apparently there were eight exits among last year's finalists. Pretty good going and I could see why. In attendance was a stellar cast of movers and shakers including venture capitalists, investment bankers, corporations, law firms and sector experts from Europe and beyond.

First speaker was Manish Madhvani of GP Bullhound who summarised what was going on in the markets: any return to growth at the start of the year had been eliminated. But, even so, there were still a respectable 173 digital media transactions in the year to date, probably because Internet is so capital efficient. Transaction sizes were a little smaller than last year however. The hotspots for M&A and investment are in e-commerce, games, mobile, social networking and dating.

US corporations currently have largest cash reserves ever (approx $1.8tr), so the recent buying spree is set to continue. Interestingly, cross-border acquisitions are on the rise, but acquisitions by Asian companies are still a long way behind European and American ones. Manish highlighted some likely acquisition targets: the European online advertising market is worth 80% of the US market, yet the value of the top 10 European digital media companies is only 4% of American counterparts.

Manish was ambivalent on the future direction of the market but his position on whether we're in a bubble or not was clear: quoting Ben Horowitz, he believes that that major adoption wave for the Internet is still to come. Based on mainframe and PC adoption cycles, that will come in the next eight years.

The second keynote speaker was James Sperans of Morgan Stanley, a successful private equity investor and founder of four start-ups. His inspiring presentation was titled "Why Venture Capital Stinks" and discussed whether VC is dead, the European risk culture, the enduring mythology of America and the metaphorical similarities between innovation and plantations (orderly, systematic and efficient monocultures that do not like interlopers) and rainforest (chaotic, thriving, evolving and adaptable). The key insight is that some European business cultures such as Germany appear to favour the plantation over the rainforest. He finished his presentation with three observations about European innovation:

  1. Don't obsess about Silicon Valley
  2. Do what you do better than anyone else
  3. Embrace diversity (don't be isolationist)

In the Corporate Venturing panel, Nagraj Kashyap from Qualcomm Ventures and Jorg Sievert from SAP ventures told us that corporate strategy is not the main driver behind investment decisions, but only a by-product. The main objective must be ROI in order to be aligned with the venture's founders and co-investors. Corporate acquisition targets may not be good venture deals; in fact they are often overvalued.

Qualcomm favour early stage investments and give early access to new devices and expertise on what it takes to get a mobile product out. SAP, on the other hand, favours mid and late stage, as their strength is in helping companies build out globally by leveraging SAP's global presence.

In contrast, Anu Shah from ZAG (the venture arm of ad agency Barty Bogle Heggarty) stresses the benefit of introducing an entrepreneurial culture into the corporation and the ability to take managed risks, as well as the potential upside of venturing. ZAG is a better partner for early stage ventures as they can road test new ideas with their portfolio of clients and move forward with operational support and cash for the successful ones.

In the most interesting panel session of the conference, Building Billion Dollar Companies, colleague Tony Kypreos created an alternate reality world in which funding is the commodity and talent scarce. In other words, a reverse "Dragon's Den": the investors on the panel needed to pitch themselves to the entrepreneurs, Ryan Gallagher from IOVOX and Paul Veugen from Usabilla.

Yves Cornaz, echoing the previous corporate venturing session, explained there are two distinct investment groups at Google. The first, Ventures, invests around $100m/yr across all sectors and is focused entirely on generating returns. The second, Corporate Development (his group) makes outright acquisitions into innovative and proven technologies that will support the growth of Google. They have made over 100 acquisitions in 10 years, including YouTube, Android and Motorola Mobility. Google has the know-how to develop the right strategy for a product and can provide access to its platform and distribution to take it global.

In his pitch, Bernard Gander explained that Logitech makes and sells 10 products every second and has sold over 10bn mice! They generate £2.5bn in sales annually, 50% of that from acquired companies. As most of them are doing about $10-15m at the point of acquisition, Logitech is clearly very good at leveraging its channels to grow them globally. Interestingly, Logitech has moved away from corporate venturing: they either license the technology and work with the entrepreneur or acquire it. The objective is to share experience and provide access to all Logitech assets. This wouldn't work for anything less than outright acquisition.

Bernard advised entrepreneurs to focus clearly on the disruption on which they're building their company. Bring something new to a market and dominate it. You don't need to be a $1bn company, just dominant in your area. Become a big small company, i.e. stay flexible and agile.

Open Ocean Capital has specific expertise in monetising community and open source businesses and that is where they invest. Tom Henriksson and his team leverage their broad and deep experience to help startups with an established user base build scalable, global businesses. Tom's advice was to focus on the customer and the business model will follow. Also that 30-50% of a company's value is in its story and all $1bn companies have investors.

Hubert Deitmers from Van den Ende & Deitmers is an Endemol board member and private investor. His passion is sharing his experience of building a global company with other entrepreneurs. His preference is to get in early, not necessarily as a board member, but as a partner to help grow a company. They take a large stake (20-30%), prefer not to co-invest with venture firms and prefer a maximum of two or three shareholders.

Hubert has a problem with acquisitions: if you acquire 100% of a company, then the entrepreneurs are no longer entrepreneurs. He thinks it's better to keep them in their own building and leave them alone. Acquire fully when proven. His advice was to focus in order to grow. Don't think pathway to exit, but pathway to strategic and personal goals. Be bought not sold! Only enter markets where you can be a top three player and partner with the best local players.

As Ryan Gallagher from IOVOX (Google Analytics for telephony) believes that board members earn their seats rather than buy them, Hubert was his favorite investor. IOVOX investors don't sit on the board and provide more than just money - advice, experience, a partner but definitely not a boss.

Paul Veugen felt that Google offered the best path to global growth for Usabilla (the easy and fun way to collect feedback on your website). He thinks European VCs are too focused on business model and early traction, rather than seeing the bigger vision. In the US, VCs focus on building a user base and have faith that a business model will follow.

In the Q&A session I asked what governments can do to help build billion dollar companies. Ryan said that high payroll taxes in Europe actually encourage employers to offshore. He also thought that government had a role in encouraging entrepreneurship but not in making investments. Hubert agreed that it was about changing the culture and education, while Paul said that although government support is well intentioned, ultimately it is down to the entrepreneur.

In the less sceptical corner, Tom spoke about how the Finnish government is a co-investor in their fund and how a portfolio company received very helpful startup advice from a government agency. Bernard mentioned that the mouse was invented by a university in Lausanne but commercialised by Logitech, so they were the beneficiaries of government funding also. Another very interesting suggestion was that Governments put pressure on large customers to pay their suppliers within 30 days. This would be even more beneficial than increasing bank lending!

In his entertaining keynote, Ashley Ward from European Leaders spoke about talent alignment. Surround yourself with brilliant people, align them around the vision and then let them do their thing. There's no need to micro-manage if you have a good execution plan.

Marcel E. Smit of Q-go, the natural language search company which was acquired earlier this year by RightNow for $34m, gave an insightful talk on what he'd learnt on the pathway to exit: 

  • Focus – define the best battlefield for your business
  • Be different – stand out from the competition (Q-go offers a money-back guarantee)
  • What is your mantra? For Q-go, it's the highest relevance search
  • Be due diligence ready – operational excellence
  • Get on the radar – with press, analysts and anyone else you need to attract

In the Building a Brand panel, Jane Gideon from Incendio emphasised that you need to make sure you're communicating the long term vision as once you have marketing in motion, changing direction is like trying to turn a barge. It's about establishing your values and an emotional connection with customers. It isn't one off activity.

Tony Kypreos added that brand and marketing are easy to do badly and many technology companies and investors fall into this category. Brand is the essence of what you mean to your customers and stakeholders. Emotionally and functionally it mustn't be confused with branding which is merely the wrap-around. Tony emphasised the essence of authenticity i.e. substance over style. It's better to be authentic and not slick, than slick and not authentic. Don't try to create a personality that doesn't exist was also Jane's message. Brand personality needs to reflect the personality of the business executives. What's unique about us, what are we passionate about?

Mindy Hall of Mercury asked who is the core audience? Think about what the audience needs and what's relevant to them. Focus on specific niches and understand them. Don't try to do everything at once. Mindy and Hanna Manninen from Ink also mentioned that a SEO optimised headline in a press release is more important than a catchy headline!

All in all it was a very insightful conference. The focus on "gazelles" feels absolutely right. After all, according to the Kaufmann Foundation, these firms created 40 million net new jobs between 1980 and 2005. Helping them along the pathway to exit is also right. The National Venture Capital Association in the US says that 90% of job creation by venture-backed firms is after they go public.

Enough bull for now. Stay tuned for part 2…



Bullish in Berlin

This week, in my third post on the White Bull Tech Entrepreneur Series, I'm reporting from Berlin. The Library of Soho House is probably the most luxurious setting  we've had so far for one of these events: a splendid Bauhaus building dating from 1928, originally a department store and then occupied by the post-war Communist regime. Great surroundings for a discussion on entrepreneurship and the next batch of German Internet millionaires.

The evening started with a short presentation from Ciarán O'Leary, Principal at Earlybird Venture Capital and, according to his own description, the only Irish national with a Bavarian accent. Ciarán talked briefly about the investment landscape in Europe. His numbers were for all sectors but give plenty of reasons for optimism in Europe and Germany in particular.

  • There was €13bn worth of venture-based liquidity events in Europe in the last 24 months, of which €4.4bn took place in Germany and €3.9bn in UK. 
  • Europe is producing better returns than US – a higher proportion of European exits are over $100m and at higher exit multiples (although exits are lower on average).
  • While European entry valuations are significantly lower and less capital is invested prior to exit, average exit valuations are only slightly lower than in the US ($304m to $388m).
  • At the same time, the European entrepreneurial talent pool has grown in both quantity and quality - in 2009, 7.4% of the European population were deemed to be "latent entrepreneurs" and the proportion of repeat entrepreneurs in Earlybird’s portfolio increased from 7% in 98/99 to 50% by 2007. Earlybird sees repeat entrepreneurs as key to reducing operational risk.

The scene set, we then discussed the strengths and weaknesses of entrepreneurialism in Germany. It was no surprise to hear that Germany produces great engineers, that the people are very hard working and like to build stuff, so are good at execution. A structural advantage Germany has over the UK is that if you want to earn a big salary you have to be an entrepreneur as only a very small number of the top jobs pay million dollar salaries. In the UK, these sort of salaries are relatively common in the banking industry which, as a result, sucks up a lot of our top talent.

Markus Fuhrman, Venture Partner at Team Europe was less confident. Lots of local Internet businesses have been copycat sites, albeit adapted for the German market. With low barriers to entry on the Web, it’s very difficult to build global businesses. Germany's last huge start up was SAP. The panel agreed, however, that Bigpoint, SoundCloud and Tomorrow Focus had the potential to do very well.

When I asked how Germany and the UK could work together, Michael Moritz owner of Catcap Corporate Finance was pretty negative about the UK – it isn't entrepreneurial or innovative, has lost its manufacturing and is now over-dependent on financial services. Although, he conceded, UK is still important for German companies for liquidity and IPOs.

The other panelists were a bit kinder: Brits are good at sales so they would look to recruit heads of international and other seasoned executives here. The UK also has good access to global corporates and it is easier to enter the US via UK. A good case in point is SoundCloud who set up a subsidiary in UK in order to be near the record labels and have investment from UK VC firm, Doughty Hanson.

Without doubt, Berlin will be giving London's Tech City a run for its money, but I think that if you're a media play rather than pure technology, London is still the place to be.


White Bull Stockholm for an Entrepreneurial Smörgåsbord

“Profitability is the new black” is how Farley Duvall introduced the White Bull mission at the second of the Tech Entrepreneur Series in Stockholm, this time hosted by legal firm Bird & Bird; I've posted about the inaugural session in Paris previously. While start-ups are important, so too are the later stage tech companies who are generating revenue and even, dare I say it, profit. We like this space too: companies that have a proven business model, a deep understanding of the niche in which they operate and are creating real jobs.

The evening’s panel session, ably chaired by Tony Kypreos from UKTI’s Global Entrepreneurs Programme, touched on the strengths and weaknesses of Swedish entrepreneurs and the ecosystem they inhabit. The consensus was that entrepreneurship is now considered sexy in Sweden with high profile enjoyed by role models such as Skype founder Niklas Zennström and Daniel Ek from Spotify. Sweden produces good engineers, but its entrepreneurs can be cautious and are less good at sales. Full of tech-savvy early adopters, Sweden itself is a great test market, where trends spread very quickly. Swedish companies and brands are associated with quality and great design (think Volvo and IKEA) but many entrepreneurs are happy to run profitable, regional companies rather than setting their sights on global leadership.

Steffan Helgesson, from early and growth stage VC firm Creandum, said there were two options for his portfolio companies when considering internationalisation: the US or UK. The UK is a bigger market than Sweden, with good access to corporates and Asia  - a "small US". That European corporates don't work closely with VCs and small companies was cited as another difference with the Valley. Also less common in the European ecosystem are lawyers and other advisors with deep experience of working with start-ups.

Focusing on the next big thing isn't the best approach to investing in Europe. The advice is to invest in innovation across the value chain and in all niches where we excel. There is a current window for good IPOs, but most tech companies in Sweden get acquired before they reach that point. We finished with a discussion about Asia and how there are seven or eight hubs emerging there, but it was a very challenging and unfamiliar place for European entrepreneurs to work. To which John Elvesjo (founder of eye-tracking and eye control firm Tobii Technology) responded, "Isn’t overcoming challenges what entrepreneurs are supposed to be able to do?" Quite.

The other panelists were Marie Reinius from the Swedish Venture Capital Association; Andreas Brojesson from Bird & Bird; Lea Bajc from Scandinavia’s largest VC firm, Northzone Ventures; and Per Axelsson, M&A expert at Handeelsbanken.

As well as the panel session, we also heard from a couple of local companies. First up was Freephoo, a mobile internet telephone company. Currently only available as an iPad app, it will soon be available for iPhone and in all the other app stores. By downloading the free app, users can make free calls to other Freephoo users, while calls to mobile and fixed lines are charged at very low, and clearly advertised, rates. Early users include ex-pats, especially from countries where international mobile and fixed line calls are very expensive.

There is no set up and you can access your account from any device. This simplicity is a key differentiator from the competition. Freephoo also integrates your address book, making it very easy to make and receive calls. This is an area where the founders think “brand Sweden” will help them: they promise not to abuse their access to your address book. Freephoo stands for trust.

The other presentation was from Complex Made Simple who are developing a free e-commerce solution for SMEs and individuals with a social layer.

Next stop: Berlin…


White Bull/UKTI Tech Entrepreneurs Series… first stop, Paris

It was a lovely spring evening in Paris and I was at the offices of Kahn & Associés, just off the Champs Elysées, to moderate the panel discussion at the first White Bull summit of the year. Despite the whole event being conducted in English, for the benefit of just a handful of us monoglots, the debate was extremely lively and interesting.

The mere suggestion from a British woman living in Paris called Christine, that the French tax regime hammered companies, drew the most heat. The R&D tax credits, the discounts on payroll taxes and corporation tax make France a great place for start-ups, according to the entrepreneurs in the room. Indeed, the panel added, the last five years has brought great economic liberalisation in France.

The evening was the first in a series of summits taking place in various European cities over the next few months, bringing together the tech entrepreneurial ecosystem to talk about "pathways to exit". That was the subject of further heated debate: the IPO market in France isn’t a great option for tech companies at the moment, so the most obvious exit route is via trade sale, usually to a US buyer. We briefly touched on Second Market, another option for creating liquidity but not yet available in Europe. Yann Mauchamp from Mutual Benefits (one of the evening's panellists) had identified 50 companies here for whom this would be a good option.

The fragmentation of both the market and regulatory systems in Europe were seen as further barriers to the growth of European global leaders. Platform companies like Meetic, SAP and Criteo were seen to have the greatest potential to overcome this.

The panel session followed three presentations from very different companies, all with real customers and revenues and now looking for growth funding to internationalise their businesses.

First up was iOS games developer, Pixowl, creators of Doodle Grub (essentially a modern take on Snake, using the device’s accelerometer, and a great hit in France). They were asking for funding in order to finish their next games, Safari Party and Phoenix Fighter, and expand into the US market. 2% of players of their first game are from the US, despite no marketing or reviews there, so they believe there is growth potential for them in that market.

Green Links couldn't have been more different. Using both a B2C and B2B model, they provide in-city delivery using electric powered bikes and small vans. Loads are delivered in the usual way to their city fringe locations during the night. They are then repacked into small delivery vehicles for the "last mile" delivery first thing in the morning, cheekily using via bike lanes and pavements. Somewhat disarmingly, they admitted that lots of people had already tried but failed to pull this type of business off, but their USP is their use of online logistics tracking and ability to incorporate the B2C element, ie the "first mile". Also, legislation is likely to change in their favour with delivery companies, and their clients, being penalised for not going green. TNT is a major client, so things look good for them.

Last, and most ambitious of all of them, I think, was certified. Apparently the first global identification provider, MyIDis are looking to provide members of the public with a single online ID to be used in commercial transactions. They're currently rolling out in France through a hook up with the French postal service.

Over the course of the evening we also heard from LD&A Global and Truffle Capital.

I'm now looking forward to hearing from contributors at other White Bull events across Europe this summer and getting to see how tech entrepreneurial cultures differ across the continent. More observations from Stockholm in a couple of weeks...