The coffee shops of Mayfair

Apple is the evil empire, stupid

The iPhone will be the nail in the coffin for Apple's credibility.

I have hated Apple ever since I tried to get AAC files to work on a new MP3 player, then a new pc.

I hated Apple even more when I tried to play iTunes tracks in an opensource media player.

Lock-in! Proprietary formats! No flexibility! The bastards.

Yet I was a voice in the wilderness. Whenever I asked either developers or other consumers they loved Apple.  The iPod was a piece of achingly beautiful design. Steve Jobs was cool.  Macs kicked Microsoft's proprietary ass.

The iPhone is changing everything. Developers are beginning to hate Apple and I think consumers will be next.

What's the problem with iPhone?

Mike Arrington at FOWA was half way there today when he said Apple is pissing people off by limiting them to one network.

I think there's a much bigger problem. The genius of the iPhone is that it provides an interface for people like my dad to access and use mobile apps. The problem is how hard it is to do this.

Great technologists like Sutha  are livid that developers can't even officially write to the OS X layer.  They're officially limited to a not-so-rich web-browser in which they can build very simple apps, but that can't take advantage of any of the power of the iPhone. These apps can't run offline, can't take a
peek at your address book, or anything else. They certainly can't do any of the slick graphical things that are making people generally salivate over the iPhone.  You CAN create native OS X apps that do much more but this means hacking the iPhone.

So my dad can have some widgets but they're not really useful.

In essence Apple is going against all the principals of openness and interoperability that so dismays developers and eventually consumers.

And now hallelujah! People are starting to dislike Apple. I am pleased for two reasons:
1)Wonderful opportunities for entrepreneurs.
2) Finally I feel vindicated ;)

The Post-Google VC

I have been spending some time with some great entrepreneurs across Europe as part of the FOWA Road Trip and yesterday in Copenhagen was no exception.

In particular it was great spending some time with Nikolaj Nyholm and Nicolaj Reffstrup.

Nikolaj Nyholm made one comment to an entrepreneur which really resonated with me.  To paraphrase:

“You need to raise money from a post-Google VC.  An investor who has lead a company in the last 5 years since Google has been so dominant.”

At one level this is another contribution to the discussion of what makes a great VC (I will leave that one to Fred et al.)

It is, however, of far more significance for entrepreneurs with a web app or offering.

Working for Reevoo and Glasses Direct, both very different businesses, taught me the significance of distribution, and the dominance of Google.  Some examples:

You need first rate SEO?  That will be >£100k p/a for a 19 year old whiz kid.  Someone who will be impossible to manage but can transform your business with organic traffic.

You need to bolster traffic in certain niches?  That’ll be a potentially bottomless pit of adword spending.  (Particularly true if you’re late to a competitive market: look at the differential in adword spend between gocompare, moneysupermarket and confused)

That’s not to mention the possibility of Google using some of their warchest of come after your particular market.

Many entrepreneurs are so focussing on building such a great offering that they also assume virality of distribution is inherent or inevitable.  Unfortunately its not that easy, and Nikolaj is dead right to warn that getting help from people who “get it” is crucial.

Calling Copenhagen: Entrepreneurs & Angels

Are you based in Copenhagen and doing something cool on the web? If so come on down to the FOWA Road Trip tomorrow at The Dubliner .  Ryan Carson has put together some cracking evenings to date each with a whole bunch of great people. It’s sort of like Open Coffee but with beer, more entrepreneurs, more angels and local VCs (apart from us ).

If you wanna have a word or meet up before hand.  Ping me.

Why we love seedcamp

I am back to work this Monday and have a stack of seedcamp applications to process.

I think there are two particularly exciting things about Seedcamp:

1) Ecosystem

Seedcamp is a terrific opportunity for some young and bright entrepreneurs to spend a week meeting the most incredible set of people.(This speech and this link gives a flavor on the board, but I understand Saul will soon be revealing some incredible mentors flying in).

The power of a network is fascinating.  Some people seem to think that it’s an end in itself.  I don’t agree. 

A network is not a set of business cards.  A network is not someone you’ve met once at a rabid networking do.

The best people I know, I have worked with.  Working in their company, with their board, negotiating a deal on the same side or the opposite side of the table. Sharing my opinion and experience.  Having it shouted down, debating and sometimes being listened to ;)

What is wonderful is that the successful seedcampers will get to meet a cracking set of people and engage with them. Hearing their opinions and experiences inside successful businesses.  Strongly disagreeing, debating and sometimes agreeing;  The closest thing to actually working with them.

2) Thinking big

Seedcamp gives entrepreneurs the opportunity and a very supportive environment to think big. 

I am a strong believer that the “go big or go home” mentality is absolute rubbish. Entrepreneurs should not feel obliged to manically strive to create businesses that change the world.  Its just not the right path for some people, some business models or some risk profiles.

However, if you don’t consider how you can build your idea into a billion dollar business at the start, its very hard to turn it into one halfway through. If you don’t “just go for it” when you’re young, it’ll be much harder when you have a mortgage and a nice car to drive to a comfy job at a business park in Bracknell.

That’s why I’m excited about seedcamp.

European Venture Capital: What have we learned?

Now that I am no longer an advisor (albeit still on gardening leave) I can look back with some detachment on the whole process of raising capital or selling your company.  I want to do two posts: what does the VC market looks like today, and to answer the question, what is it with advisors anyway?

The market today:

Over the last 8 years I have been privileged to work with some incredibly talented management teams and entrepreneurs.  Through-out each process I have sat through some meetings with remarkably astute, insightful and experienced VCs and corporate acquirers and also some incredibly rude and clueless investors.   (I have also met a similarly diverse range of entrepreneurs!)

Let me focus on VC: I will cover M&A in another post.

I think that the European VC scene is a notably better place and that  THNGS ARE GETTING BETTER ALL THE TIME. 

• The ecosystem for entrepreneurs is getting better: from uni spin-out hubs & clubs to booze fuelled dinner table debates.
• The quality and segmentation of investors is getting better; from international success-stories like Index to small, ultra focussed funds like Eden Ventures. 
• The DIALOGUE is getting better; I doff my cap to initiatives like open coffee club which fosters mutual understanding. I believe VC –entrepreneur relationships are far less adversarial and far more informed than they were 8 years ago. (Fred has a nice angle on this too)

It is this last point that raises the question: what is the point of advisors? Let me explain. In the bay area there are no corporate finance houses running Series A B or C rounds.  This is done in-house, by an NED or maybe by the lawyer. European VCs ask me: why do European entrepreneurs need people like First Capital?  I will turn to that in the next post.

2006 Early Stage Venture Capital into European Web2.0

I have now pulled together all the numbers for European Seed and First Rounds into consumer and internet businesses in 2006.  (The final list is  at the bottom of the post in all its glory). 

So what are the headlines?

European Web2.0 investments are BIG and have skyrocketed from last year. 

More than £144mn was raised in Europe across seed and first rounds in 2006 by 54 European web2.0 companies.  This total doesn’t include the “undisclosed investment” rounds, of which there were 16.

The growth is remarkable. 

In the UK in 2005, just £24mn was invested into web2.0 companies.  In 2006 that figure increased threefold with £79mn worth of early stage investments into 21 companies.

VC investment patterns are changing

Active VCs

Index Ventures is the most active. No surprises there.  But a quick look at their syndicate partners shows the (re) arrival of the Americans. Sequoia doing a first round in Europe!? Rather surprisingly the active investors aren’t just the London based mega-funds like Benchmark and Accel: Great to see Mangrove coming out on the front foot after the success of Skype.  Finally the activity of not usually headline grabbing Nordic Venture Partners.

Investment strategy

Astonishing that we don’t see any investments in the area from 3i.  I would have expected to see something from them, not just because they’re the biggest and oldest player in Europe, but also because in 2006 they recruited the incredibly web-savvy Daniel Waterhouse from Yahoo!  Maybe 2007 Daniel?

Also interested to see Atlas Ventures back with a vengeance.  Their investment strategy seems to be following copycat models Daily Motion (YouTube), Koodos (Yoox), and I understand another business (to be announced) is also directly competitive to a UK venture backed web property.  Is this accident or design Fred? 

Range of web businesses

Companies that make money

Good to see that many of this new breed of web company has very explicit revenue generating capabilities; they are either stores/services (Wiggle, Stardoll, Moo.com), or they facilitate the process of buying/selling somehow.

Models that build on models

I am really interested to see two types of companies using third-party web-services as a platform. Firstly, eBay is the platform for two VC backed businesses.  Autoquake  helps people sell their cars on eBay, auctioning4u helps anyone sell anything on ebay.  Secondly there are web-services which serve parts of their sites onto other peoples. Examples include Reevoo  serving their genuine customer reviews onto retailers sites, or Dailymotion allowing bloggers to show video on their
sites.

Ecosystem 2.0

European politicians should be delighted that we have a thriving entrepreneurial ecosystem which they have been attempting (hoping) to build to compete with the USA, principally the West Coast. 

Interestingly, this ecosystem is not centering on the Universities or the government sponsored funds.

It is instead the Silicon Valley model of second time round entrepreneurs, experienced business angels and VCs who have already been through a few cycles.  So we see the team behind Active Hotels either as Execs or Angel investors at Reevoo.com .  We see Mel Morris of match.com as an angel investor into SoFlow.com.  Firebox founder Michael Smith doing it again with Mindcandy. Pierre Chapaz, founder of Kelkoo.com is now at Index Ventures. We see  second time round entrepreneurs are Eyeka (CEO Giles Babinet sold Musiwave), the Skype guys doing The Venice Project & Fon's Martin Vavarsky previously founded Ya.com and Jazztel.

Company	Investors	Description	£MM	Location	Round	Date
Aggregator	Amadeus , Intel Capital , 3i	WebTV	9	UK	1	Jul-06
All Peers	Index Ventures , Mangrove	Private P2P media sharing	W/H	UK	1	Mar-06
Auctioning4u	Foresight Venture Partners	eBay drop-off stores	2.2	UK	1	May-06
AutoQuake	Accel Partners	Sell cars over the web	3.4	UK	1	Jul-06
Bebo	Benchmark Capital	Social networking community	8.5	UK	1	May-06
Exabre	Eden Ventures	www.thefilter.com itunes plug-in. Last.fm-esque	W/H	UK	1	N/D
Koodos	Atlas Venture	End of line retail.	W/H	UK	1	Jun-06
Last.fm	Index Ventures, Atomico	Consumer audio filter	2	UK	1	May-06
Mform	Artemis	Online mortgage comparison	2.5	UK	1	Sep-06
Mind candy	Index Ventures , New Media Spark	Online / offline games	3.97	UK	1	Oct-06
Moo Print	Atlas Venture, Index Venture	Customized printing solutions	2.83	UK	1	Apr-06
Murcia Solstice	Enterprise Ventures	Web and text social network	0.55	UK	1	N/D
Netvibes*	Index Ventures , Accel Partners	Ajax desktop / DLA /Filter	8.17	UK	1	Aug-06
Reevoo	Eden Ventures	Online publisher of genuine customer reviews	2.5	UK	1	Dec-06
Seat Wave	Not disclosed	Viagogo lookalike	W/H	UK	1	N/D
Skinkers	New Media Spark	RSS publishing	2	UK	1	Jan-06
Soflow	Kodiak , Northbridge	Social networking for  professionals	2.8	UK	1	Mar-06
Viagogo	Index Ventures, Atomico	Online Ticket exchange	9.9	UK	1	Jun-06
Wayn	Esprit, Angels	Social Network for travel	5.5	UK	1	Nov-06
Wiggle	Isis	ecommerce: online retail	12.5	UK	1	Jul-06
Yuuguu	Enterprise Ventures	Enterprise collaboration	0.6	UK	1	Oct-06
Jalbum	Nordic Venture Partners	Web photo album tool	W/H	Sweden	1	Jul-06
Polar Rose	Nordic Venture Partners	Online photo search	2.72	Sweden	1	Jul-06
Stardoll *	Index Ventures , Sequoia	Online dress-up community	6	Sweden	1	Jun-06
Fon *	Sequoia , Google , Index	WiFi sharing	12.33	Spain	1	Feb-06
Properazzi	Mangrove, Angels	Property Search	W/H	Spain	1	Nov-06
ebuddy	Lowland Capital	Multiformat IM	3.41	Netherlands	1	Oct-06
Spotzer	Undisclosed	Ready to air video advertising	W/H	Netherlands	1	Jun-06
Pigsback	Angels	Consumer coupon and discount site	2	Ireland	1	Oct-06
SevenLoad	New Media Ventures, Stroer	Video platform & white label service	W/H	Germany	1	Nov-06
CoComment	Netage Capital Partners	Blog comment tracking	0.75	Germany	1	Dec-06
DJTunes.com	High Tech Gründerfonds	Online music Download	0.3	Germany	1	Dec-06
Imageloop	Angels	European Slide.com	0.6	Germany	1	Dec-06
Kimeta	High Tech Gründerfonds	Vertical Search (jobs)	W/H	Germany	1	Dec-06
Locr	High Tech Gründerfonds	Photo Tagging	0.39	Germany	1	Dec-06
Nachtagenten	Burda Digital Ventures	German Clubbing Social Network	W/H	Germany	1	Dec-06
Page Flakes	Benchmark	Ajax desktop / DLA /Filter	W/H	Germany	1	May-06
Qype	Partech , Advent Ventures	Local search services	W/H	Germany	1	Aug-06
Spreadshirt	Accel Partners	Consumers design  T-shirts,	W/H	Germany	1	Jun-06
Wazup	Innovacom & Wellington Partners	Game Search Engine	5.20531	Germany	1	Dec-06
Criteo	Elaia, AGF Private Equity	Recommendation engine	2	France	1	Apr-06
Dailymotion	Atlas Venture , Partech	Euro YouTube	4.77	France	1	Aug-06
Eyeka	DN Capital , Ventech	Mobile video and image market	2.72	France	1	Feb-06
Kewego	Banexi Ventures Partners	UGC Video	3.4	France	1	Apr-06
Olfo	Members-only e-commerce	Edmond de Rothschild, OTC Asset Man.	2.1	France	1	Dec-06
Viaduc	AGF Private Equity , Ventech	Viadeo.com is social networking for  professionals	3.4	France	1	Jun-06
vPod.tv	Innovacom, Angels	Online video	2.5	France	1	May-06
W2.Media	Angels	www.Vozavi.com "consumer expert" decision-making	0.8	France	1	May-06
Wikio	Loic Le Meur, Martin Varsavsky, Pierre Chappaz, Jeff Clavier	User managed news search engine	W/H	France	1	Jun-06
Yoono	Social Bookmarking	AGF Private Equity	1.02	France	1	Aug-06
Igglo	Benchmark , Taivas	UGC Real estate	8.51	Finland	1	Oct-06
Quintura	Mangrove , OpenView	Visual Search	W/H	Europe	1	Nov-06
Joost	Not disclosed	Non-linear webTV	W/H	Europe	1	N/D
Zyb	Nordic Venture Partners	MobilePhone backup	0.6	Denmark	1	Oct-06

A vintage year for investing. I am honoured to be working with the entrepreneurs who are driving it. Of course, the real test for us all comes of course at exit….

Methods. This has been a mixture of old fashioned primary research, desk research and most significantly help from readers: thanks to all those who posted or wrote with deal deals, many of which were missed by the mainstream deal databases.

*These deals have had Seed and First rounds in 2006 and total funding has been summed in the table

Reference sources used: Venture Source, CalibreOne research

Reevoo is a trust filter for the web

Reevoo today announces a $5mn Series A fundraising* from Eden Ventures and a raft of experience angels. There have been a few questions about what is this investment  is all about.

 
Let me give a view.

 
A massive problem with the web is knowing who and what to trust. Not only because of the growth of dodgy review sites and spoof blogs / affiliates but also because “kosher” ecommerce sites themselves want to increase the levels of trust consumers place in them. They have worked out that higher online trust = higher online conversion.

Reevoo is solving this problem with a two pronged attack;

 
1) The ReevooMark product is a service to collect reviews from retailer’s customers who have already bought goods. ReevooMark aggregates these reviews around products and serves these reviews back to the retailers sites. (see Dixons , Currys , Jessops etc ).

 
2)Reevoo.com, which is still very much in Beta, also provides a destination for consumers to read these reviews to help choose what to buy. Price comparison engines were the first generation in helping consumer WHERE to buy.

Reevoo provides a trust filter to help consumers work out WHAT to buy.

I have blogged before about how much value there is in delivering what the consumer wants without them having to ask for it. For me this remains an area of white space on the web and one where VCs have been making their bets this year. Last.fm does exactly the same thing for music.

The other exciting thing is that if Reevoo can dominate the part of the purchase process that focuses on WHAT to buy rather than where to buy it will become an enormously powerful platform for shaping purchase decisions.  Ben Tompkins is the General Partner at Eden Ventures who I negotiated the
Reevoo investment with. In his previously life at Broadview Ben was the guy who sold Kelkoo to Yahoo  for €475 million. Ben understands what the value an investment in a second generation site like Reevoo could yield.

 
*First Capital advised Reevoo on this fundraising.

2006 Venture Capital Investment into European Web companies

2006 Internet and media investments

It’s a little premature to be releasing any numbers, but I have been taking some time to look over the deals done so far this year at Seed and Series A Level.

As I noted when First Capital ran the web2.0 event last year, I was convinced that we would see not only more deals into European web companies but also a significant up-tick in the amount invested. Just from the list of companies noted below, you can see we’re already far ahead of last year’s numbers.

 
The list is interesting as it shows new investors to Europe (who’d have thought we’d see Sequoia active here?), some other investors appear to have woken up. The type of companies are fascinating too: Far more online-offline models such as Moo and Spreadshirt, some of the filter technologies that excite me so much like Netvibes, PageFlakes and Last.fm, and also a new breed of online media properties like the wonderfully named DailyMotion.

Worryingly I also see a few directly competitive investments from competing VC firms… feels like 2000 again.

Dear reader, this is not yet a complete list, and I need your help. Which have I missed or got wrong? I know are few are missing but they not closed yet ;) but there's others I will have just overlooked.

Send me mails if I’ve missed stuff off (remember only seed and first rounds, only European companies) and I will publish the complete list with investment amounts at the end of the year.
 

2006 Consumer internet and media investments

Seed and Series A Level

The story so far...

Islandoos and don'ts for sucessful social software

This Tuesday's FT devoted half of page three to Mint Digital's Bloombox product implemented as Islandoo (disclaimer: I have a personal interest in Mint). 

They were right to: BloomBox is more than an off-the-shelf YouTube.  Let me tell you more.

Bloombox is essentially a white label social network and rich media tagging system that enables enterprises, media companies and brands to recruit and retain customers or serve employees.  It achieves this by creating an interface to information that is both intuitive and social. 

Mint Digital have got it right on a number of levels.  Their implementation for RDF is called Islandoo which is a social network set up specifically to recruit contestants and viewers of a reality tv show called Shipwrecked.

The numbers are remarkable: "since its launch (6 weeks ago) it has garnered almost 18,00 profiles, 1.5m comments from users and almost 10m page views" (some other wonderful quotes here and here)

Yet many groups have failed with similar attempts. The worst forays into company sponsored social  networks have been dismal. The biggest failure was Pepsi who made a Youtube-esque site during the world cup.  A worldwide multi-million on-can promotion encouraged customers to upload their own versions of the Pepsi TV ad was a dismal failure: a worldwide campaign yielded only 23 videos. The majority of which were from the same family in Romania!

So what is the secret to Mint Digital and islandoo's success? The secret is in the incentivization and execution of the software.

1) Incentivization . Mint Digital have spent time and money to work out the formula of how to make web2.0 successful for an enterprise.  It conducted research on how people use myspace by studying a range of 12 - 25 year olds online. The results were fascinating (also here).  They found female users spent most of their time messaging other buddies and making their sites look pretty.  Male users spent most of their time checking out photos of pretty girls.

Mint has designed the user journey and incentives of islandoo so that within the first day of signing up, and male will get about 10 pings from attractive females asking for their votes: a win win scenario.

2) Execution. Bloombox is more user friendly, prettier and has more user focussed functionality than anything else out there.  The platform has been coded by the team who made the origional Real Player. Cameron Price, the CTO, was part of the original team behind the original Microsoft Media Player.

I think one of the most exciting aspects for Bloombox is the transferability of this technology to any industry that needs to recruit or retain customers. Or educate a work force.  The challenge here is not only making a site that people like using, but also a site that incentivizes people to use it.  For customers and employees this is more tricky than offering an audition for a tv show, but can be done.

I believe that this could be the next generation of enterprise software.  A lot more on that in forthcoming posts. 

PS. I have been taking a lot of stick recently on my poor post rate. (No match to the prolific rates of Fred, Nic or Max). The good news is that I have been incredibly busy working on two deals.  Delighted to say we did announce the sale of Smart421 to Kingston Communications.  Smart421 are leaders in managed services of applications to enterprises, which many argue is the first manifestation of a larger movement in enterprise 2.0 (arrrgghh: another buzzwood...).

PPS.  Delighted to see that VCs don't need to ask entrepreneurs "who else are you talking to?", nowadays they just need to check Flickr.

User Generated Content

Just a quick note to say looking forward to seeing many of you this week at my favourite media technology software business MintDigital's UGC event.

Just like the rest of the VC community, we are seeing a big up tick in UGC businesses.

Just as I predicted ;)

I have been looking at this value chain in detail ever since the BBC interview, and I am going to follow up with a couple of entries post-event.

PS. For those who've not got the invitaiton from me, forgive me, and do ping me if you'd like to be on the list.