I am 100% with Klaus, and by the way, the European media companies are disappearing from the map of dominant media brands, with the possible few exceptions (Guardian, BBC).

Wrote a post on this a while back: http://bit.ly/TJsPI

“If you look at traditional media companies, you will find giants like Vivendi, Bertelsmann, Lagardere, WPP or Reed. Running this study in April 2008, our friends at Jefferies found that 8 of the top 25 media groups were European, representing 22% of revenues, whilst 2 were Asian. If you look at global new media audiences, you found 4 European groups representing 3% of audience !!

If I believe the new Comscore April numbers, we now have ZERO European groups in the top 25 and and a mere 5 in the top 50 (Orange, DailyMotion, Terra-Telefonica, Spill Games and BBC). I don’t know how much of an international audience BBC has, but basically we have legacy leaders and two transnational upstart companies.

This analysis also applies if you look at the proportion of media revenues coming from online, which is much higher for US companies than their European counterparts (in April 2008, it was 10% for US players and a mere 3.8% for the Europeans). Whilst France is busy passing backwards anti-piracy laws under intense lobbying from its industry, the war is being lost.

In a few words, the digital disruption is rocking the content world and wiping out the European media brands.”

I think, on this occasion, that swearing was unhelpful: when Klaus said “who’s going to be this shit”, I think he meant “who’s going to buy this stuff”, not “who’s going to buy this garbage.”

If the latter, I’m not worried. Garbage that VCs invested in shouldn’t be bought.

But since I think he means the former, it’s a huge issue. European media is in big trouble.

The long term hope is that European IPO markets open up and companies that are doing well can float and become the next massive media companies.

In games, companies like Bigpoint are going that way. In mobile, it’s Zed and others. I’m sure that there are many others.

But M&A exits to major European buyers? Those look thin on the ground.

“who is going to by all the shit in our existing portfolios?!”

I guess he meant buy.

Absolutely agree with Klaus and Fred. We need large pan-European online media & services companies. Nobody focusing on just their own country or even a group of neighboring countries will be strong enough. There are some things that need to be more centralized – like product development and technical operations – and some which need to be really local.

10 years ago many tried: Spray, Everyday, Lycos Europe, Yahoo Europe etc but failed for various reasons. Sure, a lot of mistakes were made, money burnt, consumer and advertising markets were not there. Could today be a better time? Is someone at least trying to do something like this?

Building such a group across Europe organically during nearest years does not seem realistic, just don’t see it happening. Might be possible via pure M&A route with a lot of private equity put behind it, but like we all know, acquiring something across 50 states in Europe Europe and then making it work as one integrated group is tough work and has a lot of risks. Still would like to see someone at least trying.

Naspers / MIH Europe should be followed for sure, they do many things right, although even they should be much bigger and more aggressive to be of strong influence across Europe.

I am skeptical about traditional media companies growing to be these large online leaders. Just like 10 years ago, they have too much baggage.

Cut the “Crap” already we all know that european startups point there nose to american markets. The only market that adapts and grows faster then anything europe tech company could manage localy its stil luck that counts.

So while some investors whine about disadvantages european media-works-at-a- slow pace.

Well known startups like facebook or twitter storm the web with culture and publicity, Come on if any of european startup wants world domination start by getting funded and storm it already at the prefered targets whatever.

And for these idiot investor not knowing how to coach that simple fact to the ones listed in their portfolio wel you guy’s are douchebags.

These comments just goes to prove European VCs are just idiots.

The job of a VC is to invest in a company and create something valuable to another entity who will buy it off of them. If they cannot create something valuable enough for another entity to buy it off of them, then they should not have invested in the crap in the first place.

The fact that no one wants to buy money losing crap like Dailymotion is entirely the VC’s fault.

Wow, the comment stream on Techcrunch is getting better and better. Let’s try comprehensible English, grammar if you can be bothered (I will forgive absence of punctuation for the under 30′s) and logical argumentation; then, maybe, we can have a conversation. And let’s cut the anonymous crappy comments…

Apologies, the above comment was meant to come here in the stream…

Look out, he’s feeding the troll

hey i am just glad someone finally put me out of misery and allowed me to see the light

I am an European entrepreneur myself and I must admin, the EU VCs are horribly crappy. Say “software” and see them run for their lives. We have talked to many VCs and posted our summaries on various platforms, but all we got was criminals offering us cash (in 500 EUR banknotes, no less than 10 millions, please give us small change instead soon). There is no VC culture in Europe, as there is no real investment culture. I am tired of hearing the opposite, because it is just not true. Some start-ups have found funding, but they are just very very few exceptions. Creative people I know have gone to Silicon Valley (not that they are all successful there, but the success rate is much higher).

In a nutshell: Hommels is right.

Haeger, in no particular order:

Index / Accel / Atomico / Balderton / Mangrove / Amadeus / Wellington / Atlas / Partech / Northzone / Sofinnova / Ventech / Elaia / Banexi / Eden / Advent / …

Yes there is a lot to do still, but can we stop the “let’s crawl in the corner and just wait to die” attitude ? It ain’t that bad, it’s better than 5 years ago and it will be better next year.

Sorry, just because companies passed on the crap your portfolio, don’t come here crying like a little baby.

Let me give you some advice: don’t invest in crap in the first place.

Fred, stop trying to defend yourself.

You’re in a hole, stop digging. The only reason you are even here in EU is because no respectable SV VC would give you a job.

deffinitely agree with Klaus’ comment “Whenever we want to grow we are too reliant on US companies and too reliant again when we want to sell.”
However a change in the near future seems unlikely

Damn just broke my shovel again…

Well, the major problem of the European market is that we have many different countries speaking different languages. On the other side, you have a huge country with +300M english speaking people with credit cards with high tendency to spend instead of saving. So, that helps a lot.

Why does geography matter? I thought the Internet was supposed to end jingoistic nonsense.

No VC is investing at this time without a huge proof of scaleabiltity!

European VC’ s start at some Hundred thousands of revenue unfortunately. That’s too late for many businesses & entrepreneurs

@Fred Destin

Thanks for enlightening us with the names of the VC firms which we all know – that wasn’t the point of the matter.

Now, can you enlighten us with, say, the top 10 European exits in the past 5 years (don’t say I’m not being generous)? [Note: By "European exit" I mean a company based in Europe, backed solely by EU investors, and which was acquired or went public].

How many of those exits were driven by EU companies?

That’s just a ridiculous comment. How can we have a discussion of issues like this if the kids are going to spam up the board with dumb statements.

VCs are there to provide growth capital once startups have derisked the things they can do without the big cash infusion. What VCs cannot do is change the environment of the potential acquirers – which in the EU is the media incumbents – nor can they change the IPO markets single handedly for non-acquisition exits. And that’s the point the blog and Fred’s comment makes.

There are issues with EU VC, and Fred is someone who is very open to talking about them in a frank way on his blog if you read it. But really your comment points to the fact that the bigger problem is that prospective entrepreneurs don’t really get what VC is for, and they don’t understand where they need to get to before they can attract VC investment. Playing the game of anonymously kicking a self-identified VC is probably fun, when for whatever reason (fair or unfair) you are frustrated at your own lack of startup success, but it’s something you should probably grow out of before trying to raise cash.

Circling round to the main point of the article – I think the author/speaker nails it. The EU model is broken. The big media companies are far too close to government and manage to buy short-term protection for their broken business models. In some way this is even worse in the US, as the political system lets big companies outright buy influence, but the legal framework for startups and the infrastructure in particular to get tech/media startups funded and off the ground to critical mass before they even hit the radar screens of the incumbent giants, is far far far better. (And, by the way, the EU VCs are the good guys in trying to change that infrastructure.)

So I am an entrepreneur that moved from London to Silicon Valley 10 years ago. I did so because the funding environment was not as good in London for early stage start-ups. If it was as good back then as it is today I’d have stayed.

The biggest problem is that I think most EU entrepreneurs have a false idea of how it works in Silicon Valley. I think what they hear, and what is actually the case, are two different things. In Silicon Valley companies don’t get funded based on just an idea unless the founding team are serial entrepreneurs with a track record of success (preferably with the funding VC).

The entrepreneur’s job isn’t to come up with a neat idea. There are plenty of those. Got great ideas – if you don’t put it into action you’re a dreamer not an entrepreneur. An entrepreneur’s job is to derisk the idea through execution and if it’s the kind of business that will require a lot of capital to build then the job is to de-risk it to the point at which such capital can be brought in. There’s plenty enough risk after the VC money comes in – that’s why most start-ups fail.

Sure some get founded pre-revenue, but that’s because other risks have been taken off the table – massive user growth; hard core patents won etc.

This is the best environment in history to get a tech/media company off the ground with AWS/EC2 type services; with all the ad networks for revenue and adwords lead sources; tools like Ruby on Rails… if you’re going to bleat that you need VC funding to hire programmers to build something, then you’re not an entrepreneur.

TechCrunch readers really love to rag on the VC, but it’s tiring for those of us who work our asses off actually building realistic businesses that are potential VC investments to hear the complaints of those that cannot figure this out without handholding. Piss off and talk about your idea to the muppets on Dragon’s Den / Shark Tank as that seems to be the idea that a lot of the commenters seem to have about building a startup. (To be clear: if you think pitching VCs is like Dragon’s Den/Shark Tank you are wasting your time aiming to pitch at VCs in the first place.)

Don’t get disheartened – there’s plenty of ways to prove scalability without having hundreds of thousands in revenue.

You can prove out your business model and market size in lots of ways… people much smarter than I are writing about Lean Startups, Customer Development, Minimum Viable Product and allied approaches/methodologies that can be a great guide as to how to get a company to the point where either you’ve demonstrated that it’s not a VC-fundable company (most aren’t) or it’s ready for VC.

Apart from the simple issue of varied culture, language and concomitant scalability there is also ‘imho’ an inherent problem that is equally prohibitive. I wrote this (http://blog.famebook.com/famebook/2008/12/response-to-michael-arringtons-french-excursion.html) last year following LeWeb and MA’s colourful postscript and it was pointed out to me that there was a term for this European malaise – http://en.wikipedia.org/wiki/Jante_Law

The one thing that Europe does have over the US is a natural style and elegance which appeals to global brands and which is still lacking in some of the biggest tech properties. We’ve discovered that our US cousins will certainly invest in that…

I applaud Klaus for honestly (and colorfully) calling the issues out in a public forum; opening himself to potential criticism and debate. It takes strength and conviction to go against the grain. But his experience and history as a successful investor (Klaus was the first angel investor in Skype and was named “Angel Investor of the Year” in Europe) adds credibility to his commentary. He’s also active in business development for his portfolio companies and opens his vast international network to help out people, whether as an investor or not. That generosity, combined with the acute business and financial acumen, is why I think Klaus is a thought-leader and one to watch. In Europe… in the US… and abroad.

Strange – I was there and I heard Klaus loud and clearly. But it was just one single statement at the the end of the discussion.

Funny, how you make news by getting cited out of context.

Klaus basically said “who is going to buy all the rubbish we invested in…”? Big laugh.

Interesting posts above. With far too much abuse. But I’m obviously glutton for punishment because I want to ask three questions here:

1) ARE AGGRESSIVE ACQUIRERS ALWAYS A GOOD THING? Often the highly priced deals destroy shareholder value. Look what Time Warner/ AOL is offloading; look at the flak eBay ran into over Skype (not to mention JoltID); ask CBS about Last.FM; talk to anybody at Google about the New Corp / MySpace deal. I heard recently of a big west coast tech firm that *wanted* to overpay for a tenancy deal by $700m in an area it had crap product, just ‘pour encourager le tech team [to improve the product]‘; this craziness could surely only happen in America. I perceive European media firms to be notably more conservative and, pace ITV, to have made fewer stupid acquisitions. You won’t hear VCs saying this as the word ‘overpaid’ never applies to their trade buyers but in the real world the media firms in Europe struggle to pay crazy multiples and who are we to say they are stupid? If they were so dumb we smart TechCrunch-types (joke) would be running rings round them, which we aren’t. Google and Microsoft didn’t need to get bought to be a fantastic outcome for their investors.

2) HOW MANY OF THE ‘WHINERS’ PORTFOLIOS ARE DEFENDABLE PROFITABLE BUSINESSES? The best companies aren’t build to exit, well before they turn a profit, at some inflated ‘user multiple’. They are cranking out EBIT and making life tough for their rivals. Take ARM. Take Autonomy. Take CSR. Or QXL/Tradus. Or SAP. Or Sage. Or ASOS. Or Vente Privee. Or BetFair. Or Jagex. Or LOVEFiLM (disclosure – I have an interest in this one). These are all great businesses with unique tech, strong market positions and all are able to charge a healthy price without fear of having their lunch stolen overnight. Not too many VC-backed startups can say this – certainly very few of the ‘whiners’. I’m not saying this is a rosy picture; there aren’t enough IPOs in Europe, there aren’t enough global plays, and behind even some success stories there are big wasted opportunities. But the successful firms didn’t climb onto a podium to sulk when nobody wanted to pay them a high revenue multiple just because they had no profits.

3) WHAT’S WRONG WITH DEPENDING ON AMERICAN PLATFORMS? American businesses depend on the (English, by origin) rule of law and the English language and it doesn’t disadvantage them. I’m quite happy to depend on Linux, MySQL (Oracle/Sun notwithstanding!) and Apache any day, and don’t care where they come from. I share the concern about Google, but am also benefiting hugely from how easy it is to deploy Google to market my companies and monetise traffic – so there are swings and roundabouts. My companies also use Sage, mobile telcos, ARM chips and SAP and I dare say CSR – so the Europeans who built the truly valuable services are getting their pound of flesh too. Yes, the Americans are getting more – well done Dell, Intel, MSFT, Google in my particular case – but in my view they deserve it as they have in general built stronger, more defendable businesses.

This should give the cynical reader plenty to take pot-shots at!

I spoke to panelists present at the event and they basically said they were quite he glad came out with this comment and they’d slightly wished the panel had *started* that way so they could talk about these issues (and not run out of time) – and about whether they agreed with him or not. There’s some context for you. It’s an ongoing debate, as you can see,

Aside from the underlying structural issues in EU media industry; are we not maybe missing one main issue naturally affecting change; we all speak different languages. America’s success in the original wave of tech Start-Ups aimed at the public was the size of their ‘captive audience’; their market was the same size as our but they all spoke (US) english; even in the middle east.
For investors this cultural homogeny is very attractive – and Europe doesn’t have this to offer.
So, we need to ‘Stark’ it, re-design our market appeal; as mentioned in an earlier comment.

It would be interesting to look at the efficiency of media investment capital in the US vs EU. I’m sure the study is out here I just can’t remember seeing it – it can be quite difficult to get investors to cough up the value of portfolio companies in firesales/well below exits though.

I have always managed to raise capital, when required, in Europe. It is very hard but if you think you have a winner then you bootstrap or persevere. I don’t have experience doing so in the States but I am sure it is just as hard as it is here.

I suspect the tech media make it sound like you come up with the idea and the money drops in your lap. Funny how I do not see proportional coverage of the thousands of companies that really wanted investment but never got it – not very exciting.

I take William’s point 3. As an example I use Google for infrastructure in my company. It costs me nothing (vs full time admin and associated servers/licences) and delivers an excellent service. Meanwhile I concentrate on making money – who is profiting from whom?

+1

William Reeve: 1
Fred Destin and other Whiner VCs: 0

For clarity, I do not consider Fred Destin to be a ‘whiner’! I am fortunate to count him as a colleague – and a very able one at that

…..So much of the culture of silicon valley and the U.S. in general is about the possibility that with some execution an idea can become a reality.

Culturally in the U.S. it is acceptable to talk about a new idea that you are working on and not be greeted with the scorn and skepticism that I often here in Europe when start ups and entrepreneurs are pitching their ideas…..I was actually in a meeting recently with a European enterprise search company trying to explain to them that in order to attract investment from VC’s that they need to at the minimum have plans to launch in the U.S…..One of the founders of the company challenged me on this point saying that….”all the good tech ideas in the U.S. are more about luck than anything else….” and then he told me that all the top tech companies are not from the U.S…..He actually asked me to name the top tech companies that are from the U.S……I looked around at the other people in the meeting and said out loudly…”You must be joking”….There was total silence…..He was not joking…So I began to name some and then I stopped at after naming quit a few, and told them that I had better things to do…..My point is that the culture of skepticism and critique beyond logic and reason has a strangle hold on the possibility of ideas…If this does not change there is no hope….

…..So much of the culture of silicon valley and the U.S. in general is about the possibility that with some execution an idea can become a reality.

Culturally in the U.S. it is acceptable to talk about a new idea that you are working on and not be greeted with the scorn and skepticism that I often here in Europe when start ups and entrepreneurs are pitching their ideas…..I was actually in a meeting recently with a European enterprise search company trying to explain to them that in order to attract investment from VC’s that they need to at the minimum have plans to launch in the U.S…..One of the founders of the company challenged me on this point saying that….”all the good tech ideas in the U.S. are more about luck than anything else….” and then he told me that all the top tech companies are not from the U.S…..He actually asked me to name the top tech companies that are from the U.S……I looked around at the other people in the meeting and said out loudly…”You must be joking”….There was total silence…..He was not joking…So I began to name some and then I stopped at after naming quit a few, and told them that I had better things to do…..My point is that the culture of skepticism and critique beyond logic and reason has a strangle hold on the possibility of ideas…If this does not change there is no hope….

Sounds like the most controversial comment may have been slightly out of context, but I completely agree with some of the underlying themes.

Established European companies can NOT be relied on for early adoption of anything innovative…

It’s a combination of very low risk appetite and decision making processes that are extremely slow.

Why are the most intelligent and considered comments and commentators on these threads the ones that are subject to the most abuse?

How many European media companies could afford to pay for a really chunky exit? I can’t think of any UK media companies that could have paid what ebay paid for Skype.

And even where they do notionally have a billion or two in cash (in the middle of the worst advertising recession in living memory), most European media companies are only really strong in one country (for good reasons) and those markets are smaller – less than a third of the US population at best and digital advertising is disproportionately smaller. That means the potential to scale an online business alongside your existing media business (which is the justification for buying it) is really pretty small. Sure, Axel Springer (to pick a name) COULD buy a pan-Euroepan online business, but that’s a strategic diversification quite different from a US company buying a pan-US site.

I used to work for a Big US media conglomerate, and they could always look at a digital acquisition in the context of cross-marketing to a local user base of 300m. There’s no European media company that can really do that.

It will be interesting to see if and how Russian Digital Sky Technologies (http://dst-global.com/) will be acquiring across Europe, in addition to their current portfolio. DST and Naspers are both to be watched (http://paidcontent.co.uk/article/419-more-mmo-ma-in-russia-naspers-buying-astrum/). Pretty sure we will more Russian as well as Chinese money on the European markets in the next few years.

We’re European bootstrapped.
We don’t have a VC.
Maybe we should be just happy for that.
As we are making money without VC.

We didn’t wasted time on talking to VC’s.
We didn’t sign any share deals.

We are still free.
Born free – run free

Too many people in the financial community speaking up, too many quantifiable remarks; what about the comment “you run into a wall trying to convince European companies to adopt early models” ?

This is the one of the underlying issues, the capability of Europeans to break away from a business culture embedded in “history” and move to one that is increasingly “entrepreneurial” like the counterparts in North America. The gap has something to do with how North American’s are brought up and schooled and although there is a generation in Europe that is starting to accelerate the change, they are not yet in positions to “make change happen”.

I have been too often the witness to European project failure because of the lack of vision and go-hearted guts, NOT because of lack of available funds.

In my opinion it’s just a question of mindset and until there are a sufficient number of successful role models in Europe, the “old school” won’t change, and that’s a tangible short term risk not to be taken lightly.

That is all great….Could you raise money ?
Do you want to be acquired or do you have an exit strategy ?

Great comment.

Incredible comment William – please come back more often! And agreed about Fred – anon commenters have clearly never met him and have no idea what he does.

Hommels hit the nail on the foreskin with his comments- he is 100% correct on this.

I’m just curious why the ganging up on Freddie Destin? Fred is taking the heat for all the frustrations (and many valid) against European VCs. The reason you don’t see other VCs here commenting is because they are the dead wood. Fred is speaking out and interacting with Entrepreneurs and as a result risks being the punch bag for frustrated Entrepreneurs.

Just because he’s one of the 3 or 4 VCs in the whole of Europe to speak out, let’s not tarnish him by associating him with the rest of the dead wood. He represents an Industry in dire need of reform and he admits that, and is one of the few voices out there in VC land to get that.

Fred is not responsible for years of EU VC underperformance. It’s getting better, but only because younger VCs like Fred are starting to take new approaches to investing.

So guys, lay off Fred, he’s not the enemy.

See also – http://en.wikipedia.org/wiki/Tall_poppy_syndrome

Disappointing thread – I’m soooo bored of TechCrunch readers beating up on VC’s.

No one is focusing on the key question the article raises: Do we need a critical mass of European acquirers to foster a start up culture in Europe.

To put this another way: Is the fact that all the major acquirers are US based a competitive advantage for US-based startups?

I’d say there is no doubt that it is. When I think of our possible acquirers they are all based in the US. How does this create a problem? Acquisition typically comes off the back of partnerships; building partnerships is hard work and harder when the corporate HQ’s (field offices are useless) are several thousand miles away.

These issues are resolvable but they take resources and experience which makes it hard for some classes of startup.

I am also an entrepreneur (and have been since 1998).

I have invested my own money, and I have also pitched to VCs in SV, in the EU, and in IL, with the broadest range of results, from spectacularly well to spectacularly bad.

There are good VCs and bad VCs, just as there are good and bad doctors, pianists, and referees. And some of the ugly things about VCs I believe just come with the job: the cockiness, the short attention span, etc – this is all regardless of where they operate.

There are, however, a couple of features that characterise EU VC and that I find particularly irritating:

1. They are overcautious – about everything: about money, about valuations, about ideas, about people, about growth…

2. Their snottiness is, with very few notable exceptions, completely baseless – their hits (if any) really belong to their US HQ while the local staff’s track record is questionable, to say the least. Perhaps Accel Partners provides the best example of this lot.

3. They like inbreeding – a lot. Yes, knowing the people from previous investments helps but this is not the Church of Scientology, you know? For examples, look at Index V.

All in all, I agree with many of your comments: venture capital in Europe *is* a million miles better than 10 yrs ago; you don’t need $5m to start up and online business today; and some TC readers *do* like to rant (about pretty much anything).

EU VC are not to blame for the state of the IPO markets or the media companies in Europe. But they could certainly contribute in turning things around, especially by working more closely with large EU holdings and regulators – after all, they have more at stake than anyone else, don’t they?

Agree, great comment.

[...] A lot of comments on the post, most of them rhetoric and finger pointing, Fred Destin – another EU VC – got into a bit and as a result was attacked by trolls. [...]

I follow these articles carefully; while i understand the fact that you need to develop something in order to present it as a business idea, i also understand the cutting of development time, meaning you program all the necessary stuff, in the most non orthodox ways.

This will not result into a highly scalable platform/app in 90% of the cases.

Now to somehow hit my problem, i am a developer, always had ideas. At the beginning i wasn’t able to craete something, because i did not have any experience. Now that i am able to produce “stuff”, i realize i miss the key ingredient, somebody who can sell my ideas to a VC to an Angel Investor.

How do you find that key ingredient when you know that you are not capable of doing that?!

Thank you.

It concerns me when people try and equate the US and European markets. The US is truly one market. Europe is a collection of smaller markets, each of which can have a very different culture. Depending on the service your business is providing this can require very different approaches.

In our experience, having launched our service in the UK, Spain, France and Ireland so far, the ‘one size fits all’ approach really doesn’t cut it. You have to have a local tailored offering to be truly successful. Which entails a significant investment that a start-up trying to prove their business in many cases will find it too hard to make.

This makes for a very different investment opportunity. The opportunity in the EU to de-risk a super-scalable business is greatly reduced in comparison to the US.

VCs and acquirers are understandably looking for the biggest wins for the lowest risk. The US market is far bigger than any one European country.

As Europeans, I would contend that we shouldn’t be trying to ape the US and dream of the apocryphal gold-paved streets of Silicon Valley.

Instead, we should focus building businesses that are suited to the markets we operate in. That way we generate real and realisable value for our shareholders.

@Adrian, there is going to be an VC company filling that gap quite soon. Were are you located?

@Engago: Great, you should have heard Oleg Tscheltzoff (founder footolia) on NOAH Conference. He basically advised everyone to bootstrap their business: Do not waste time and do not waste money. And I have to admit: If you do not have any VC money you basically do not care how to spend money. You will care every day how to make money and save money.

So here is my problem: We are just rolling out a new product. Our first plans were to charge everone for a superior set of features our product was offering. Then we realized there are two VC backed companies giving away an inferior product with less functionality – but for free. Most people opt for the free products. Even if they have to cut back on functionality.

So we are forced to gain market share by offering a freemium model. Everyone would pay for this type of product in general if the VC backed companies wouldn´t give it away for free. It´s ruining the market. For them and for us.

It reminds me of 1999 where market share and turnover were higher rated than sustainability and profitabibility.

@Steve i am from Europe, but now i live in the US. VC company that could fill the gap of my missing ingredient? How is it called?! Where is it gonna be at?

Regarding what you said… about launching a product and having other competitors, that charge less or nothing, is one of the problems that i wanted to talk about too.

How can you invest on your own (money + effort) to be above their alternatives and still not charge anything on the users end, at least till somebody will see you out there?

Servers costs, maintenance costs, advertising costs, etc…

You

As interesting was his comment ‘Why are you so good?’ to which he replied ‘Luck!’. Respect the Hommels. Anyone who gets into to a personal share offer from Zuckerberg and Shak knows where its going. I’d like to see his contact list. We need Hommels x 10. Bleeeurrghkkkk!

I thought Klaus H. gave some insight into how he thinks and its rare to hear it, so it was fascinating. To comment on Williams post 1.) My all time favourite is Geocities and Yahoo. Yahoo paid $10,000 for each FREE website account! 3.) We have a very long history of US firms acquiring European companies, its very well established, Klaus H. was really saying ‘Lets keep it all in Europe and take on America – hell yeah! type attitude’. To which everyone went silent and very quiet. And also maybe he was having a go at the Yahoo guy next to him

This is a great point. There was actually some detailed economic studies relayed by Martin Wolf from the FT indicating that the massive productivity gains that the US enjoyed through the last 20 years could be fairly clearly attributed to the continued adoption of new / unproven technology by established, large corporates in revolutionising every aspect of their value chain, Walmart being a prime and massive example. European corporates by contrast are shy and tend to be both late adopters and, confusingly, spend too much.

They say ‘opinions are like assholes, everyone’s got one’, but in Martin’s case he is quite simply one of the coolest European investors and executors and is an exception to the rule. His post is a good one with a lot of merit for the defence…. http://bit.ly/75AykO – “The Burdens in the life of the American Entrepreneur or Why Europe’s GDP is largest in the World”

[...] [...]

@all the Fred Destin bashers out there:

1) you’ve obviously never met him

2) he is one of the most forward thinking and risk taking VCs out there so let’s encourage him rather

3) he truly cares

@william: great points. Companies are bought not sold.

@richard: we made three investments in the US this fall: all are pre-revenue companies BUT they are headed by recognized entrepreneurs AND they’ve made massive headway on no money.

@kathy: Klaus wasn’t the first angel investor in Skype. Morten Lund was. Klaus was one of the first but he did re-invest at a whooping eight figure valuation and that takes massive b@lls…

@Mike: Klaus stands out so starkly given his successes that he reminds us there should be 10,000 Klauses across Europe. We’ll take a thousand

Lastly I think the biggest problem is not European Media companies in general but their management culture. European Management is so cautious they’d rather have a small loss of 2% this year than shoot for a +20%. Thinking goes like this: “let’s blame it on the crisis and I keep my job.” And “if i shoot for the stars I’ll get blamed and possibly lose my job/status/membership at the country club etc.” So we are back to William’s point: build great companies and you’ll take over Europe. Or move to the US.

@Ezequiel: I am sure the data is out there, some of the larger exits that come to mind would be CSR, Iliad, Skype, Basilea, Betfair, Vistaprint or Q.Cells.

Look, I am not saying we are great; I am focusing on the future and saying “yes there is a live ecosystem, success breeds succes, we need to keep developing it”.

If you take the Paypal crew in the US, they started YouTube, LinkedIn, Facebook !

Recycling a comment here I put on Farhan’s blog to save time: “Look at the impact that the Skype boys are having (ok Joost failed, but boy are they trying hard: Atomico, Rdio) and the Skype diaspora (Ek @ Spotify, the Ambient Sound Investments guys). Or Michael Birch and Brent Hoberman. The guys who made big invest in and mentor the guys who will make it even bigger.”

Thanks for the list of IT VCs. Where can I find a complete list with a ranking or a sorting?

I co-founded a mobile content company in 2002 which we sold to a Chinese media company in 2006. From a finance point of view we couldn’t find an Irish VC to back us largely because Irish VCs don’t generally specialise in media investments. The problem was then that non-Irish VCs don’t want to invest because they want to see a local VC in there first. It’s a catch 22 that we overcame by doing an angel round with private investors.
We had a number of US companies look to acquire our company. The reason was because they wanted access to our Japanese suppliers, European markets and internationalisation and porting expertise. The fact that we could position ourselves as an acquisition for US-based companies was a good thing. Many European companies have been purchased for similar reasons. If large European media companies won’t buy local media startups there are other buyers in the US and Asia. Maybe we should consider them more as an option in the years ahead.

I think that we are missing out one of the exit advantages of European startups: their multi-lingual, multi-currency operations.

US startups can reach scale hitting the 300 million English-speaking, dollar-spending Americans. For a European to reach scale, they have to work out how to operate in France, Germany, the UK and dozens of other countries.

That’s a huge barrier to entry and a meaningful competitive advantage. US acquirers then have a choice of building their product/service out in multiple languages/currencies or to buy someone who has already done it.

I know a number of VCs who see that as the strength of European startups, and a driver of exits, particularly by US businesses.

Which means that the fragmented nature of the European market becomes to celebrate, not bemoan.

I (still) believe that there are enough potential buyers are out there. However the deal sizes in Europe, due to the fragmented markets, are quite likely smaller and much more regional. Perhaps European VC’s shouldn’t try to shoot for 500m+ deals but go for a wider variety of smaller deals. For a portfolio strategy this is quite a difficult one since the big hits make-up for the disasters elsewhere. So the question then remains, should VC’s at all invest in early stage companies?

Aside from that fundamental issue. The challenges that I come across trying to sell a company in Europe is to find the right buyer in a reasonable time frame. Within Europe my experience is that not many ‘traditional’ buyers know what’s for sale out there. Simply including them in a foreseen auction doesn’t bring anything since the auction time frame is typically always too short to make up there mind and saying “No thanks” is always the easiest answer.

I always suggest to CEOs who want to sell their company to simply ‘pencil in’ X hours a week to spend on investor(/potential buyer)-relations. Make sure that the ones that you aim to sell to are aware of your existence. At the point that you want to exit relevant buyers know who you are and can make a decision within a reasonable time frame!

Great companies are always going to find buyers.
Finding buyers is not difficult, building great companies is .
If you set out to create a company with the main motivation as exiting 3-5 years down the line then most likely you are going to struggle as the motivation is in the wrong direction.
Forget about it and build.This is a far greater challenge than finding a buyer later on.

[...] Ich bin mir sicher, dass es 2010 wieder einige hochinteressante Modelle zu sehen geben wird. Viele Teams haben sich in diesem Jahr zusammen gefunden und trotz der widrigen Situation die ersten Entwicklungen hinter sich gebracht. Ein Startup von der Idee zur Gründung oder gar zum Produkt zu bringen, ist bedeutend langwieriger, als man erwarten mag. Wo in vergangenen Jahren Business Angels die Grundlage geschaffen haben, um erste Schritte zu probieren, haben sich in diesem Jahr viele gute Dinge entwickelt – oftmals Abends, an Wochenenden oder aus bestehenden Firmen heraus. Die Gründer dieser Firmen können jetzt schon erste Produkte aufweisen, haben teilweise bereits Umsätze oder konnten Modelle entwickeln, die vorerst ohne externe Finanzierung auskommen. So zeigt sich ein weitaus gesünder und organischer gewachsenes Bild an Firmen, die in den kommenden Jahren die Früchte Ihrer harten Arbeit ernten werden. Investoren haben wieder interessante Optionen und auch Blogger haben endlich nicht mehr ganz so viel über die langweilige Deutsche Szene zu klagen. [...]

Totaly agree with David. You should concentrate on building a great business. Only then money will follow, not vice versa.

I have a feeling that many today’s wannabe Netpreneurs see situation as a quick buck opp scheme. Enrty bar is relatively low, let’s build something and try to sell it to a VC’s. It is much harder to believe into something, to evaluate all points of usability and comercialization, and to endure along path.

But back to the topic, Europe does lack on quality entrepreneurs, VC’s and buyout companies. Whole envrionment is much more underdeveloped than US counterpart. My experience with all three here in EU is pretty disturbing. Add to this many different, yet strong, local cultures which only add to the EU-market-as-a-whole problem. Re. Media companies in EU, they are quite lost – I have alot of contact with some of them and have this strong feeling. There are sleepy and confused and I don’t see signs of improvement.

Indeed things are going better bit by bit, but I think process must be accelerated before it’s too late for old lady EU.

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