Tag: venture capital

Angry birds funder shuts fund for Eurotech

Investment outfit Atomico has closed Europe’s largest standalone tech venture fund claiming the situation in the EU has changed and its services are not needed as much.

For the last ten years the fund has provided $765 million to help tech companies start outside the US.  The London-based venture firm was started by Skype co-founder Niklas Zennstrom.

It has invested in around 60 firms since it was established in 2006 and backed Supercell and Angry Birds maker Rovio Entertainment.

Most European start-ups to be acquired rather than holding out for stock market flotations of their own in order to build powerful global tech franchises.

Mattias Ljungman, an Atomico partner, said that thinks were changing in the region both in the maturity of entrepreneurs and business models. The outfit will still invest in Europe but will be interested in other regions now.

Some of Atomico’s recent investments included Scandit, a Zurich-based barcode-scanning software supplier, and Lilium Aviation, based near Munich, which is developing an electric jet with vertical takeoff capacity that could be used as a flying car.

 

Atomico is the latest in a succession of European-centered venture firms raising record amounts of venture capital. The trend reflects the growing size of individual funding rounds for the hottest start-up firms and the entry of new sources of capital from outside the world of start-up financing to compete for those deals.

But others are now providing funds too. Global VC firm Accel Partners last year raised a new $500 million European fund, while Index announced two joint U.S. and European funds – a $550 million fund for early-stage seed investments and a $700 million fund for later stage companies.

Previously, Balderton Capital raised $305 million in its latest European fund in 2014, while Lakestar raised a 350 million euro ($371 million) fund in 2015.

Rocket Internet last year announced a $1 billion Rocket Internet Co-Investment Fund in conjunction with a range of outside funders that is largely designed to take bigger stakes in its previous investments.

 

How Google, Qualcomm, SAP decide to invest

How do money men in some of the world’s biggest technology companies decide where to invest their considerable treasure piles? Mike Magee found out at the White Bull conference, 2012, Barcelona.

There are different methods to the money. Speaking to the audience (ChannelBiz UK) Google’s Yves Cornaz pointed out that when it buys, the bought become Googlers overnight.

But the investment comes in mostly through product teams. According to Cornaz, the product teams get a clearer picture day-to-day of companies that are cropping up, which new companies are coming to light, and how. “We do some of our own analysis but it’s a bit harder for something to come out to stick,” Cornaz said. “In terms of process we spend quite a bit of time with the founders and our team inside”, to make sure they are excited about Doing No Evil at Google.

Though, he pointed out, the founders are “very much involved” with all M&A decisions.

Jason Ball, of Qualcomm Ventures, said that late stage companies, which are pulling in hefty revenues, tend to walk in through the front door, though this process can take six months to a year. “If we write a multimillion cheque, the top ranks of the company will be involved,” Ball said.

But, for the early stages, he admits he is on the hunt: making it known that Qualcomm is prepared to write a large cheque. “For normal seed programmes, two or three of us will decide and write a €200,000 cheque”.

At the moment, Qualcomm wants to sell more chipsets and is keeping both eyes open for businesses it can invest in to further that aim. Big on the agenda, as we wrote last year, is the internet of things, which the company believes will help it sell yet more chips. 

For SAP Ventures’, the company’s Jorg Seivert said there is a range of elements to pick from, including within the company at SAP Labs. “For the most part, we look for opportunities like this event [White Bull] or connecting to other VPs that we’re friends with,” Seivert said. As for the investment committee, there are six partners on it, and the vote goes to four out of six.

Venture Capitalism “mostly sucks”

James Sperans, an executive at Morgan Stanley, told the audience here at the White Bull conference in Barcelona that venture capitalism is not quite as dead as a dodo. He said that at the same conference in 2011.

Sperans is a serial entrepreneur with he and another four execs running a private equity division at Morgan Stanley.

He said that he found out that VC was “pretty damn dead”, deader than Lehman, deader than AIG and deader than Fanny and Freddy. VC was even deader than Osama bin Laden. 

VC in 2012 s still pretty dead – deader than Neil Armstrong, Gaddafi and Heidi Klum’s Marriage.  It’s not more dead than the Euro, and not as dead as Facebook.

Big sophisticated institutional investors like venture capital again, said Sperans. But CalPERS will never invest in venture capital again.  He said VC is neither dead nor alive, it’s undead, he said, as he showed a picture of two zombies.

Cambridge Associates claims venture capital is far from dead. The 10 year pooled return in 2011 was zero, but Cambridge claims in 2012 it was up by 4.41 percent. But 90 percent of this movement was an artefact of the 10 year numbers because it no longer included the bubble burst in the year 2000. 
He said investment people don’t need a stiff drink. “We have met the enemy… and he is us”.

In May 2012, the Kauffman Foundation did a deep analysis, and discovered that VC was the triumph of hope over experience.  Twenty percent of their 100 funds beat public market equivalent by over three percent per annum. And 10 of those were pre-1995 investments.

It is possible to make money investing in VC funds by concentrating on VCs that put entrepreneurs first. It’s also important to “avoid crowds”, and where the wall of capital are gathering together.  

Morgan Stanley likes to focus on themes, and doesn’t like to overdo it by investing too much in this tech sector.  

It’s great to chat about the Greek tragedy that is Mark Zuckerberg’s hubris. There are some reasonable things to draw from the Facebook IPO. First is that early investors made a lot of money. Business models still matter, it’s good to know that gravity isn’t completely suspended.  

It’s clear from the Facebook “debacle” that IPOs matter and it’s not the money, it’s the ambition. Mark Z doesn’t care about the money per se. IPOs matter because only public tech companies can make a specific gravity of their own.  And thinking small doesn’t protect people from making mistakes. “If you’re going to make mistakes, make big mistakes,” he said. And Mark doesn’t care about the rules that investors operate by.

$600 million invested in mobile app industry in 2010

Over $600 million was invested globally in mobile apps in 2010, according to investment firm Rutberg & Company, highlighting the massive growth in the mobile industry, but is further growth being held back by the long app approval processes of the likes of Apple?

The mobile app industry received venture capital investment of $601.6 million in 2010, making it 9.8 percent of total investment for the mobile industry, which was given $6.1 billion last year. That’s not too shabby for a sector that has only recently blossomed thanks to a smartphone boom.

At TechEye we receive hundreds of press releases about new apps, from the most basic to the most bizarre. While we only cover the most interesting of them, the sheer volume of new apps out there shows how lucrative a business it is.

In fact, the mobile industry is growing at a very fast rate, with investment nearly tripling in 2010 from its figure of $2.1 billion in 2009. More deals were made, up from 269 to 416, but deals for larger amounts accounted for the huge increases seen in 2010, with only nine deals accounting for $2.3 billion of 2010’s $6.1. billion.

The app sector is clearly a major contribution to this, but long approval processes could be holding back the industry. Apple is well known for taking many weeks to approve an app, with some people reporting waiting periods of well over a month. These delays could hold up further investment and further sales, which could otherwise see 2011 as another record-breaking year for the mobile industry.

VCs talk about angels, superangels and incubators

Steward Townsend of Oracle and Jon Bradford of The Difference Engine moderated a panel that wheeled in three guys to chat about the state of startups and the kind of investments they might get. Townsend is wearing an astonishing floral shirt. But he did use to work for Sun.

Sarik Weber of Hanse Ventures – a new company based in Germany – said it’s a good time to start companies. But many venture capitalists and incubators don’t understand search engine optimisation and don’t want to become part of the “ecosystem”. Incubators have to offer value to company founders because otherwise they can do it by themselves. You need angels that have experience in the industry. Hanse has founded five new companies and forged them into the kind of companies Hanse thinks they should be.

Hanse only takes half of the company they found and founders normally join up with no money. It’s a lot to do with gut feeling and analysis of the markets. The first goal is to make these companies profitable. Once a company is profitable Hanse has all of the options. Hanse has a team of 20 people including designers, admin people and search engine optimisation as part of the deal.  These services are mainly free.

Mattias Ljungman from Atomico said his company dealt with the founders of Skype and had the idea of making a business that was more entrepreneur centric – much as happened in Silicon Valley. Atomico invested in both Europe and the US and co-invested with Sequoia, Mayfield, General Catalyst and others. He said he’d noticed there was a bit of a gap in the market because there weren’t many investors in the opening stages. Atomico raised $165 million in 2010 through institutional investors. Atomico has people based in Brazil, in China, in Europe and the US. There’s about 10 people involved but his company has to think globally.

Atomico focuses on the early stages, including seed investment and money up to four or five million dollars. Venture, said Ljungman, is about thinking really big. He said Atomico is not interested in companies that are going to make less than a billion dollars. Europe has been very successful in the last couple of years and there’s more activity even in a difficult market. “We have to think big,” he said.  He looks at Europe as an emerging market.  There’s a much broader spectrum of capital these days, including entrepreneur based investors.

Atomico has invested in 10 companies, and can go in at a couple of hundred thousand. It invests in companies with good teams, and strong products. The percentage of company Atomico takes is anywhere between 25 and 35 percent. The company has had one exit so far.   The best way to start a business is to think about the next amount of money you want to raise. The company focuses on consumer businesses because those businesses move a lot quicker and you find out very soon whether a  product or business is going to be successful.

Roberto Bonanzinga, of Balderton Capital said his company’s bread and butter is Europe, but has about 20 percent outside Europe, including China and the USA. His company likes to work with people who have spark. Most investments are first money, but does invest in more established businesses, including seed money. Balderton believes the spotlight should be on the entrepreneur, not on his own company.