Who is Farhan Lalji? Rotating Header Image

The European startup view from the sidelines

Dec 1st, 2009
by Farhan.

There’s an interesting post on Techcrunch EU today, where they’ve quoted a prominent European VC at the Noah event in London this week saying:

“Whenever we want to grow we are too reliant on US companies and too reliant again when we want to sell.”

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’m not an entrepreneur (yet) or a VC (might do the do someday, but probably never) but I am a keen observer of the European start up environment. And I’m of two minds on this one. On one hand, I’m thinking so what? Big US media companies have bought European companies (Kelkoo, Bebo, Skype, LastFM) and will continue to buy the good European companies. Losing European media brands is not a big deal, it’s Darwinian and if they can’t compete with the international disruption so be it.

On the other hand, part of it is the European entrepreneurs and VCs fault as well, how many European companies could have IPO’d but instead took an acquisition in stead? Lastminute is the only web company I can think of that’s gone public out of Europe – am I wrong here?
Instead of taking the hundreds of millions of dollars in an exit, maybe EU VCs and entrepreneurs should be focussed on creating the new European media elite.

I’ve been quick to defend British VCs, as I believe they’re good and they’ve had some successes, as Fred points out on the post there are some great VCs in Europe; Index / Accel / Atomico / Balderton / Mangrove / Amadeus / Wellington / Atlas / Partech / Northzone / Sofinnova / Ventech / Elaia / Banexi / Eden / Advent – those are some good big names. However, as another friend pointed out Google, Yahoo, Amazon, AOL and Ebay and more recently Facebook, Linkedin and Twitter would you compare any European company started in the last 15 years to these? I can’t, can you?

Are European VCs too dependent on media companies out of the US because they aren’t putting in the work to grow companies worth an IPO? Or are there no real IPO worth tech companies coming out of Europe?

I think Europe is still under developed compared to the US, but the opportunities, money and people (both on the tech and business side) are definitely here. It would just be nice to have a big win that can be included in the conversation of great media companies not just decent start ups.

The question is who’s to blame for the lack of big EU media companies that could rival the Google, Yahoo!’s etc of the US? Is it the VC’s for not taking the risk or pushing for smaller exits, or are the entrepreneurs just not swinging hard enough – or even looking for exits sooner rather then building up truly great businesses?

  • Share/Bookmark

Posted in: business, entrepreneurship, marketing, technology.

← Beyond Google part two, for marketing
Contingency plan for your business not your career →
  • thundre
    Perhaps the lack of seed capital for attempts at new markets? Startups in Europe have learned they can only be successful if they do something that will be immediately profitable/successful, which means an established market rather than a new one. This can result in a decent sized success, but not a stellar one.

    Europe wouldn't have worked for e.g. Google, who had no business plan for some time until it picked up Overture's pay-per-click text ad model. Over here the founders would have been told to come back when they had a million hits a month and a solid revenue stream. In our alternative European reality they would have given up and by now be employed at the UK branch of Yahoo.
  • Hoping no trolls this time :-) Two comments:

    a/ The point that Klaus was making is I think as follows: M&A is your most likely exit route for most companies. European media companies are poorly managing the digital evolution (generally) and thus we cannot rely on strong local acquirors for our businesses. So we are forced to seek IPO (harder) or seek US M&A buyers (hardest).

    b/ There are a bunch of public companies although most are actually e-commerce companies including lastminute, such as RightMove or Seloger to take real estate as an example (both bn market caps). And we can add Yoox this week :-) There are very few digital media companies. E-commerce can be scaled fairly massively in local domestic markets (witness in France cdiscount, pixmania, vente-privee and so on).
  • Thanks Fred.

    If we look at the US media companies that are making acquisitions though they're new media companies that are a lot younger then the media companies in Europe. Why haven't we seen the same kind of media companies emerge in Europe?

    Digital media IPOs maybe harder, but it's gotta be better for the start up eco-system, no? If a company get's big enough to IPO hopefully it get's big enough to become an acquirer of other startups. The Google, Yahoo! were created in the same kind environment as we see in Europe today (old media companies not buying digital media companies). These companies IPO'd which then allowed the US new media M&A market in this area to become what it is today.





    ________________________________
  • Yes you are right on that. Facebook is sucking the life out of every European SN upstart (Bebo, Netlog which seems to have done a nice refocus job on S-gaming), DailyMotion is trying to hold against YT, etc. I think it's fascinating, if you want to do the exercise, to map the PayPal diaspora and look at all the companies these guys have built.

    Success breeds success, it will take patient work for us to achieve the same. 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.
blog comments powered by Disqus