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Subject: Re: UKNM: Wimps?
From: Peter Beech
Date: Tue, 27 Oct 1998 18:02:23 GMT

Richard Houston wrote:

>Razorfish swallows up (sorry "merges with") Sunbather.

More likely Mike Bennett wanted to de-stress and stop worrying about
running his own outfit, take some cash for his hard work, and become part
of an international networked company that provides both safety/reassurance
and opportunity - doesn't seem to be a bad thing to me.

>Do we suffer from a fundamental lack of ambition this side of the water?

Certainly not, as many have already said it's fundamentally harder to raise
the financing over here. Reasons include:

* Cost of capital - driven by higher interest rates and therefore higher
expectations on ROI

* Lack of VC specialists for start-up / first round funding - those that
exist tend to focus on software and e-commerce, precisely because they are
high risk, high return opportunities. Arts Alliance and Cubic Egg are steps
in the right direction, but they're tiny cf. USA.

* Government initiatives like the Venture Capital tax breaks for rich
individuals (100k limit per person) are unrealistic. The only route to
getting real utilisation (i.e. to fund the typical start-up project that
needs 250k-500k) is to form a VC Trust by aggregating individual
investors - trouble is it's a bureaucratic / legalisatitive minefield to
set one up. So potential fund managers don't bother they go straight for
the City Big Boys and look for larger projects to fund (there's as much
effort and cost involved in doing the deal on a start-up for 500k as there
is in doing it for someone wanting 5m)

* VCs can be interested in first round but, - typically they'll ask you to
take away your 500k plan that you've slaved away over for months refining
and tweeking and ask you to come back with one that needs 5m (I speak from

BTW - Evidence for some of the above can be seen in US VCs attitudes - see


* There are far greater limits on exit strategies in the UK - i.e. AIM
isn't NASDAQ, ask anyone who deals with this stuff day-to-day, they'll
laugh at AIM as an illiquid market. If you do manage to get your cash and
see it though to a listing - go to NASDAQ. If you don't list, you make a
private sale.

If you don't believe me ask Dr. Murdoch at Amazon.co.uk about finding a
million quid to fund IBS.

Peter Beech peteratwebmedia [dot] com (mailto:peteratwebmedia [dot] com)
+44 171 292 5535
0973 540086
Webmedia Group http://www.webmedia.com/

  UKNM: Wimps?, Richard Houston

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