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Subject: Re: UKNM: Investment in the UK internet
From: Sean Phelan
Date: Thu, 29 Apr 1999 11:24:56 +0100

>New Media Investor is holding a business breakfast tomorrow in London, to
>discuss the state of existing investment in the UK/European internet
>industry. While it's a closed event (hopefully the first of many) we want
>to get everyone talking about what the problems are and, more importantly,
>what the solutions might be and how we can develop the European market.
>Long term or short term, we just have to get a move on. So if anyone on
>this list wants to put their oar in, contribute thoughts, concerns,
>suggestions, or just get your voice heard in the debate, then either email
>me off list or go to the web site, http://www.newmediainvestor.co.uk

Felicia et al:

I'm sure we are all aware of the common off-the-cuff answers to your question:

- lack of venture capital, because...
- UK/European VCs are too conservative, because...
- exit strategies are limited by....
- not very liquid small-cap equity markets.

My personal belief is that all the above responses are at best unhelpful
and probably plain wrong. Broadview and others make the case that most
start-ups end up in a trade sale rather than going public, so small-cap
liquidity doesn't matter. And, of course, there is increasingly a global
equity market (see various British, Israeli and Dutch firms listing on
Nasdaq) though, sadly, not a global VC market.

However, I do think it is much easier to raise 10 million in London than
it is to raise 500k; the fees, etc. on a big transaction will get a lot
of quality advisors interested, and the big VC firms find it easier to
manage a few large investments rather than many small ones. Unfortunately,
it is difficult to justify that level of investment in an internet
start-up, certainly at the first-round stage.

If I were chairing a business breakfast of the type you describe, I would
be inclined to ask the VCs present about the quantity and quality of the
business plans they are receiving, and the level of realism in the requests
for funding. Is it still true that VCs are overwhelmed by poor-quality
plans that try and raise too little money and offer too small an equity

I'd also want to ask whether it is fair to observe that European investors
still expect companies to deliver sustainable profitability in the
foreseeable future, whereas US investors have completely abandoned this goal
in favour of a rapid sprint to a stage-managed IPO.

Bon apetit;

Sean Phelan seanatmultimap [dot] com http://www.multimap.com
phone (within UK): 0171 433 0460 fax (UK): 0171 209 5194
phone (Int'l): +44 171 433 0460 fax: +44 171 209 5194

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  UKNM: Investment in the UK internet, felicia jackson

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