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.