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.
Given the slump in advertising and the increasing dominance of Facebook, the shift into other markets may not be surprising. What might spike some Silicon Valley perceptions is that many of these new ideas are coming from all over Europe. European start-ups are often stereotyped as being mere copycats of Californian innovations. But in spite of the downturn – or perhaps because of it – the standard of entries to Seedcamp has risen this year, Mr Klein said.
“The first year, 5 per cent of our applications were quality applications,” he said. “This year it was more like 25 per cent.” Seedcamp has picked 21 finalists from 400 entries.
The best new companies are coming out of Scandinavia, Israel and Central and Eastern Europe, especially Poland and Hungary. Southern Europe, however, is still underrepresented, so Seedcamp will launch an offshoot in Barcelona next year after mini-events in Paris, Berlin and Slovenia earlier this year.
However, London is cementing its position as Europe’s start-up capital. “All these teams are eager to move to London,” said Ms Sohoni. “That’s the change we’ve seen from a couple of years ago. Everyone is seeing London as an absolute hub.”
Seedcamp’s diverse range of contestants includes: Talasim, a Jordanian start-up pitched as “The Onion of the Arab World”; Yubitech, an Israeli provider of software that makes it easier to install applications on lots of different mobiles; Codility, a Polish company that helps recruit software developers; Joobili from Budapest, which provides data about festivals and events around the world; and London’s Advertag, which wants to take on Craigslist and Gumtree in online classified ads.
But in spite of Seedcamp’s pan-European outlook, Mr Klein still berates the lack of the “Silicon Valley mindset” among European entrepreneurs. “Aggressiveness, agility, speed – at least three things we see that the best European entrepreneurs have in spades but we don’t see it enough in Europe yet.”
Seedcamp Week begins on September 21; FT Tech Blog will be there.
