Europe’s Next Net Giants? Part 1.
Will web 2.0 give Europe’s startups a second chance?
It’s feeling like 1999 again in Europe. Hopeful young entrepreneurs are deserting consulting jobs to start Internet companies with funny-sounding names. VCs are initiating bidding wars for companies that appear to shoot out of nowhere. Could it be the “next bubble?” And will the few good companies move to the United States, denying Europe a technology success story once again?
Not if Europe’s next-generation Internet entrepreneurs have their way. A group of seasoned entrepreneurs—many who earned their stripes before the dot-com crash—are launching Web 2.0 companies. But instead of throwing lavish parties and “upping the burn rate,” these CEOs brag about organic growth and viral marketing. Many keep their costs down by making use of user-generated content and open-source software. Startup talent is tapped wherever they find it, in a kind of distributed employment model.
What’s also different this time around: a number are already making money, and have gotten there without venture financing. “When we could have used the funds, no one wanted to help,” says Lorenz Bogaert, CEO of Incrowd Media, a social networking company based in Aalst, Belgium, that says it is profitable. “Now we just say ‘No’ to VC.”
But VCs don’t want to be left out in the cold, especially since the spectacular sale of Skype to eBay in September 2005 in a deal valued at $4.1 billion. After a long dry spell, they are once again starting to fund consumer Internet companies in Europe. The numbers aren’t expected to reach anywhere near 2000 funding levels, when private equity investors poured more than $11 billion into 1,566 European Internet-related ventures, according to Thomson Financial. Last year, only 455 European Internet companies received funding of approximately $1.4 billion, and this year’s funding pace doesn’t appear to have quickened: through the first half of 2006, VCs made 57 investments totalling $273 million, according to Thomson.
Investments in the last six weeks under-score the growing interest: Companies funded include Finland’s Sulake, the firm behind online virtual hotel site Habbo Hotel, which raised €6 million, and Stardoll, a community for playing with paper dolls in cyberspace, which received €6 million. Index Ventures has been particularly active; besides co-investing with Sequoia in Stardoll, the VC famous for its backing of Skype recently made undisclosed seed investments in Last.fm, a social music network, and Netvibes, a provider of personalized home pages. Accel Partners led a €9-million investment in travel search engine Kayak.com as well as a €12-million second round in WeeWorld, which allows users to create digital identities. Wellington Partners, Benchmark Capital, and 3i are also funding Web 2.0 firms.
Only a very few of these bets will pay off, of course. “Some people talk as if everything Web 2.0 is sexy and successful, but like in the late 1990s, there will be a few big eBay-type successes and 90 percent will fail,” says Olivier Protard, a general partner at Paris-based Sofinovva Partners. “Even those with large numbers of users are often not able to monetize their audiences.”
But those who are aggressively investing, such as Index, say they believe business models that combine advertising revenues and premium services will prove to be worth banking on.
And European companies have just as much chance of making it as their U.S. counterparts, says Index partner Danny Rimer, who believes “this is an unusually good time to be investing in Europe.”
Europe’s Web 2.0 companies will have to compete fiercely with U.S. competitors and bright ideas from Bangalore or Shanghai. But the old world’s Internet entrepreneurs are addressing the challenge by putting their own international twist on business models.
For example, Belgium’s Incrowd and France’s Kewego do not want to ape their U.S. counterparts such as MySpace and YouTube by connecting users into one large network, but instead plan to adapt their platforms to the local language and habits of Europe’s many subcultures.
Being in Silicon Valley is no longer a must, says Mr. Rimer, leveling the playing field for European companies that want to go global from Europe.
Germany’s Plazes, which combines aspects of social networking with the “presence” features of instant messaging, counts itself among the stay-at-home group. “We have skilled, highly trained engineers here,” says Felix Petersen, co-founder of Plazes, which attracted seed funding from Netscape co-founder Marc Andreesen and FON CEO Martin Varsavsky.
And there is one more factor to consider. Venture capitalists have a new reason to shop around for consumer Internet plays on the Continent: “After Skype and FON it is pretty sexy to have a European portfolio,” says Jan Joost Rueb, co-founder of Amsterdam based eBuddy, a web application which enables users to chat with their MSN, AOL, or Yahoo buddies without having to install any program or Java applet.
After canvassing entrepreneurs, investors, and veteran industry observers, Red Herring compiled a list of 11 promising next-generation Net entrepreneurs in Europe. Some are already well-funded, others are still in early stages. All offer intriguing possibilities for both their investors and customers. They are from all over the Continent, from Norway to Hungary to Spain, suggesting that the new Internet wave is truly pan-European.
Source link: redherring.com...
To be continued tomorrow..
It’s feeling like 1999 again in Europe. Hopeful young entrepreneurs are deserting consulting jobs to start Internet companies with funny-sounding names. VCs are initiating bidding wars for companies that appear to shoot out of nowhere. Could it be the “next bubble?” And will the few good companies move to the United States, denying Europe a technology success story once again?
Not if Europe’s next-generation Internet entrepreneurs have their way. A group of seasoned entrepreneurs—many who earned their stripes before the dot-com crash—are launching Web 2.0 companies. But instead of throwing lavish parties and “upping the burn rate,” these CEOs brag about organic growth and viral marketing. Many keep their costs down by making use of user-generated content and open-source software. Startup talent is tapped wherever they find it, in a kind of distributed employment model.
What’s also different this time around: a number are already making money, and have gotten there without venture financing. “When we could have used the funds, no one wanted to help,” says Lorenz Bogaert, CEO of Incrowd Media, a social networking company based in Aalst, Belgium, that says it is profitable. “Now we just say ‘No’ to VC.”
But VCs don’t want to be left out in the cold, especially since the spectacular sale of Skype to eBay in September 2005 in a deal valued at $4.1 billion. After a long dry spell, they are once again starting to fund consumer Internet companies in Europe. The numbers aren’t expected to reach anywhere near 2000 funding levels, when private equity investors poured more than $11 billion into 1,566 European Internet-related ventures, according to Thomson Financial. Last year, only 455 European Internet companies received funding of approximately $1.4 billion, and this year’s funding pace doesn’t appear to have quickened: through the first half of 2006, VCs made 57 investments totalling $273 million, according to Thomson.
Investments in the last six weeks under-score the growing interest: Companies funded include Finland’s Sulake, the firm behind online virtual hotel site Habbo Hotel, which raised €6 million, and Stardoll, a community for playing with paper dolls in cyberspace, which received €6 million. Index Ventures has been particularly active; besides co-investing with Sequoia in Stardoll, the VC famous for its backing of Skype recently made undisclosed seed investments in Last.fm, a social music network, and Netvibes, a provider of personalized home pages. Accel Partners led a €9-million investment in travel search engine Kayak.com as well as a €12-million second round in WeeWorld, which allows users to create digital identities. Wellington Partners, Benchmark Capital, and 3i are also funding Web 2.0 firms.
Only a very few of these bets will pay off, of course. “Some people talk as if everything Web 2.0 is sexy and successful, but like in the late 1990s, there will be a few big eBay-type successes and 90 percent will fail,” says Olivier Protard, a general partner at Paris-based Sofinovva Partners. “Even those with large numbers of users are often not able to monetize their audiences.”
But those who are aggressively investing, such as Index, say they believe business models that combine advertising revenues and premium services will prove to be worth banking on.
And European companies have just as much chance of making it as their U.S. counterparts, says Index partner Danny Rimer, who believes “this is an unusually good time to be investing in Europe.”
Europe’s Web 2.0 companies will have to compete fiercely with U.S. competitors and bright ideas from Bangalore or Shanghai. But the old world’s Internet entrepreneurs are addressing the challenge by putting their own international twist on business models.
For example, Belgium’s Incrowd and France’s Kewego do not want to ape their U.S. counterparts such as MySpace and YouTube by connecting users into one large network, but instead plan to adapt their platforms to the local language and habits of Europe’s many subcultures.
Being in Silicon Valley is no longer a must, says Mr. Rimer, leveling the playing field for European companies that want to go global from Europe.
Germany’s Plazes, which combines aspects of social networking with the “presence” features of instant messaging, counts itself among the stay-at-home group. “We have skilled, highly trained engineers here,” says Felix Petersen, co-founder of Plazes, which attracted seed funding from Netscape co-founder Marc Andreesen and FON CEO Martin Varsavsky.
And there is one more factor to consider. Venture capitalists have a new reason to shop around for consumer Internet plays on the Continent: “After Skype and FON it is pretty sexy to have a European portfolio,” says Jan Joost Rueb, co-founder of Amsterdam based eBuddy, a web application which enables users to chat with their MSN, AOL, or Yahoo buddies without having to install any program or Java applet.
After canvassing entrepreneurs, investors, and veteran industry observers, Red Herring compiled a list of 11 promising next-generation Net entrepreneurs in Europe. Some are already well-funded, others are still in early stages. All offer intriguing possibilities for both their investors and customers. They are from all over the Continent, from Norway to Hungary to Spain, suggesting that the new Internet wave is truly pan-European.
Source link: redherring.com...
To be continued tomorrow..
mljevar - 31. Jul, 00:01