Lessons for entrepreneurs at Seedcamp
The motivating force behind Seedcamp – the early stage tech investor and events programme that got underway today in London – is to bolster the European technology community.
Alongside better-known deals like AOL-Bebo and Ebay-Skype, the $700m sale of internet security firm MessageLabs to Symantec in 2008 is one of Europe’s biggest recent exits, and its two founders were on hand to share their experiences.
Seedcamp and the rise of Europe’s super angels
This summer has seen some interesting blog posts from the venture capital community on the “rise of the super angels” – seasoned entrepreneurs who’ve cashed out and are reinvesting in the next generation.
Seedcamp, the European investor and events programme, is a big part of that story. Next week will see the fourth Seedcamp week in London, with 23 young companies jostling for up to €50,000 in investment and expert mentoring in what’s been dubbed the “X Factor for startups”.
But the increasingly active angel community means that Seedcamp has found itself facing competition too.
Seedcamp sees greater diversity of European start-ups
Tech entrepreneurs are fleeing from social networks and advertising revenue streams and moving into business applications, according to Seedcamp, the start-up investor that holds its annual event in London later this month.
Seedcamp – which was founded by Index Ventures’ Saul Klein and Reshma Sohoni, formerly of 3i – has seen advertising-based business models drop from 30 per cent to 10 per cent of the 1,500 entries to its Pop Idol-style investment contest since 2007.
By contrast, marketplaces that take a fee or percentage of transactions have risen by more than 60 per cent in the last three years, while “freemium” businesses have more than doubled. Productivity and business applications have increased 90 per cent while online games have “skyrocketed”, said Ms Sohoni.
Seedcamp: the winners
Seedcamp’s winners have just been announced. They are:
uberVU, from Romania, which brings together comments about a company, topic or blog post which are distributed all over the web: “We are building a conversational graph.”
Kyko, from the UK, which is still in stealth mode, but will launch in a few months.
Basekit, from Wales, which uses an easy drag-and-drop approach to building web applications. “Other website creation services lack depth.”
Mobclix, the only Seedcamp finalist from Silicon Valley, which provides analytics for iPhone applications. “Advertisers want to reach the iPhone demographic, developers want advertisers. We want to be the bridge between these two gaps.”
Soup, from Austria, is a ‘tumblelog’ which can act as a scrapbook for your favourite YouTube videos or links, or aggregate your own “lifestream” from other publishing sites. “We are trying to make it as easy as possible for people to publish stuff online.”
Toksta, from Germany, which lets social networks and dating sites add on-site chat within the browser. “If you don’t have real-time communications on your site, people will leave to use IM applications.”
Stupeflix, an automatic slideshow generator which was born out of a feature on a tourism site. We generate video in fractions of a second or minutes instead of hours and can run using much less servers.” The founders hail from French search engine Exalead and video site Dailymotion.
Each will receive up to €50,000 in funding, in exchange for a small equity stake, as well as access to business, legal and PR advice over the next three months.
Oliver Beste of FoundersLink, an early stage investment group, who was also an investor in Seedcamp itself, had words of encouragement for the 16 other finalists who didn’t win: “Even if it doesn’t work the first time, keep trying, because then you are an experienced entrepreneur, not a loser.”
Part of Seedcamp’s aim is to promote the European entrepreneurial environment. Mr Beste said: “Europe has enough consultants, Europe has enough investment bankers but Europe doesn’t have enough risk takers. You are those risk takers. You are needed to be role models for others, because you show them something they don’t even think of in Europe.”
With a second year under its belt, Seedcamp is still a start-up itself. Founder Saul Klein of Index Ventures said that he and Reshma Sohoni, Seedcamp’s chief executive, will be “doubling down” on the mini-Seedcamps which have brought entrants from all over Europe this year. So Seedcamp will be in London, Paris, Berlin and Kiev again next year, but is also planning to expand into Stockholm, Warsaw and Tel Aviv.
For video interviews from this week’s Seedcamp, go to www.ft.com/seedcamp
The best of times, the worst of times
Is this the best time there’s ever been to be a start-up? Or does the current banking crisis signal the death of American-style risk-taking for new businesses seeking funding? Each view was espoused by two serial tech entrepreneurs at Seedcamp, the tech start-up conference in London.
Brent Hoberman, founder of Lastminute.com and latterly Mydeco, a furniture site, was resolutely optimistic.
“For people who can raise money, it’s the greatest opportunity there’s ever been, because the differential is so much larger,” he said. “The big corporates will retrench a bit – they will reject all innovation and all innovative ideas. So if start-ups can be innovative, their role is even more important.”
But Martin Varsavsky, the Argentinian telecoms entrepreneur behind Viatel and latterly Fon, a wifi-sharing community, was as despondent as Mr Hoberman was enthusiastic. “I’m really sorry that the group of people most likely to finance whatever we were going to do are in such deep shit.”
The US had already lost its leadership in electronics and cars, he said. “In the last few days I think America lost the leadership in banking. It’s a pity because American investment banks had the best personality vis-à-vis guys like us,” he told an audience of entrepreneurs.
“I’m shocked by the developments of the last few days and especially shocked because they started in America,” Mr Varasavsky continued. “It’s US people who over-borrowed and caused enormous grief to themselves, to the point where I believe the future of financing will never be the same.”
Mr Hoberman advised Seedcamp’s 23 start-ups, who are pitching for up to €50,000 in angel funding, to take a two-year view, and raise more money than they needed if possible. “Assume these two years are going to be pretty miserable from the revenue side, but if you can get through that, you will have a two- to three-year lead over traditional players.”
But Mr Varsavsky said the sudden consolidation in the banking sector was bad news for start-ups seeking funding. “The larger the bank gets, the less interested they are in getting involved in companies like us.”
“European VCs are still sitting on a lot of cash,” countered Mr Hoberman. “Most of them are still going to want to put that to work. They will be tighter on valuation. The risk is higher. But that doesn’t mean it’s going to be impossible to raise money.”
The even-more-lucky recipients of Seedcamp’s funds will be announced on Friday.
Big-name backers for Dopplr
Dopplr, one of the darlings of the early adopter crowd, announced an all-star roster of angel backers today.
A social network primarily aimed at business travellers, Dopplr informs its users when serendipity delivers themselves and their frequent-flier contacts to the same city.
Its newest shareholders are a suitably globe-trotting and glamorous group. They include Thomson-Reuters chief executive Tom Glocer; Tyler Brûlé, founder of style magazines Wallpaper* and Monocle, and an FT columnist; Esther Dyson, formerly of Cnet, who announced her intention to invest in Dopplr in a Wall Street Journal article some months ago; Joshua Schachter, whose geek-friendly bookmarking service, Del.icio.us, was bought by Yahoo; and Lars Hinrichs, founder and chief executive of Xing, the German business networking site.
Dopplr declined to say how much it’s raised, instead focusing on the value of having such prominent evangelists for its service.
Those that get Dopplr, love it – for its design, its attention to detail and its easy integration with other sites such as Facebook. Those that don’t – which apparently includes paidContent blogger Robert Andrews, who calls the service “weird” – remain to be convinced that Dopplr’s main function – telling people where you are going – has broad appeal as a standalone site.
Also participating in the round, as a private investor, was Saul Klein of Index Ventures. Mr Klein’s other contribution to the startup community is Seedcamp, a conference for tech entrepreneurs which today debated two topics germane to Dopplr’s position: whether a business is worth backing as a “feature” which is set up merely to be acquired, and whether to take funding from venture capitalists.
Kevin Cornils of Buy.at, who also sold his online marketing service to AOL, said a larger, more fully developed company gets a better valuation. “The only thing to hold against AOL’s offer were our standalone plans,” he said, such as raising more money or making an acquisition.
Bebo’s founder, Michael Birch, noted the preponderance of feature sites in Europe and Silicon Valley that are “built to flip” – often to Google at a rate he pegged at $600,000 per employee.
The Seedcamp panel, which included the founders of Plazes and Jaiku, was generally appreciative of VC funding. Martin Stiksel of Last.fm said: “If you spend your own money, you could strangle your own business by being too prudent and tight… Spending someone else’s money is easier than spending your own.” (He meant this as a recommendation.)
Mr Birch was more blunt: “VCs can be your friends and they can be a pain in the arse. It depends how your relationship goes.”
For now, Dopplr still feels like a (really useful, elegantly executed) feature rather than a complete site. But perhaps having a diverse group of angel backers – instead of the pressures of a VC – will give it the space to find a sustainable source of revenue.
Euro tech luminaries lined up for Seedcamp
A who’s who of European technology entrepreneurs will be providing guidance and mentoring to a new generation of start-ups at this year’s Seedcamp. Founded by Saul Klein of Index Ventures and run by Reshma Sohoni, formerly of 3i and Softbank Capital, Seedcamp aims to build and support a community of European tech entrepreneurs, culminating in its main event in London this September.
The best-known entrepreneurs on this year’s advisor list are Niklas Zennstrom, founder of Skype, the internet telephony service, and more recently Joost, a web video provider; and Brent Hoberman of travel site Lastminute.com and, latterly, Mydeco, an online furniture retailer.
The rest of the advisors are all big names on the European start-up scene too, as founders of many of Europe’s largest recent tech exits. They are: Michael Birch of social networking site Bebo and Kevin Cornils of online marketing provider Buy.at, both bought by AOL earlier this year; Martin Stiksel of Last.fm, an online community of music fans for which CBS paid $280m in May 2007; Marten Mickos, chief executive of open-source database provider MySQL, sold to Sun Microsystems for around $1bn in January; and Jyri Engestrom of Jaiku and Tommy Ahlers of Zyb, mobile application firms acquired by Google and Vodafone respectively.
Alongside UK entrepreneurs who have yet to flip their companies for millions of dollars, and representatives from the big US tech companies who’ve been writing the cheques, this group will bring contacts, business advice and generally help start-ups at the week-long conference to “think big and aim high”.
Since May, Ms Sohoni has travelled led mini-Seedcamp events in Paris, Berlin and Kiev. But in spite of increasing numbers of new tech companies springing up in eastern Europe, she says London remains the main event. “We see the UK and London as a critical hub for start-up activities,” she says, especially for European companies with global ambitions.
Common technological themes among the entrepreneurs presenting across Europe so far include online and mobile gaming, personal finance applications, open source and variations on the “semantic web” – “the idea of using natural language to bring intelligence out of the information that’s out there”, according to Ms Sohoni.
But for those teams still applying to one of the 20 places at Seedcamp, she notes a preference of investors for business models based on transactional payments rather than advertising. “Everybody likes to put [advertising] up on their slide as a business model,” she said. “We were careful about that last year but are even more so now.”
Ms Sohoni also warns that almost half of last year’s applications came from social networking sites – none of which received investment.
“We are looking for globally applicable businesses that can grow beyond their local languages,” she says.
Seedcamp Week runs from September 15 to 19. The deadline for entries is August 10. The Financial Times is a media partner at the event.
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