Interesting article - wonder how LDP relates to this...
nytimes.com
"Incubators Feel the Heat As Dotcom
Ardour Cools
By REUTERS
MONTE CARLO (Reuters) - High-tech incubator firms, symbol of all that
was hip during the heady days of the Internet craze, may have hatched
their own destruction as the fad for dot.com fades.
Europe's venture capital firms are now muscling in, offering more
straightforward investment to a narrower range of young start-ups who
can prove they have staying power, industry experts say.
Incubators sprouted up across Europe last year, hoping to make big bucks
providing young tech companies with everything from office space to
equipment in return for a share of the glory as their ideas attracted
investors by the thousand.
Swept up by the frenzy for web-based business, they often floated their
own stock in the process, and now find themselves under the same market
pressures as their dot.com darlings.
``Between October and March this year there was a feeding frenzy...the
incubator market has gone very quiet since then because a lot were
e-commerce based and those models are having a tough time,'' said
Michael Jackson, partner at Elderstreet Investments and head of British
software firm Sage.
``Venture funds are increasingly coming in, as incubators proved to be
much more time consuming and labor intensive... not a successful business
model,'' he added.
Jackson was speaking at the European IT Forum, held here this week,
where the subject of funding for European technology start-ups was a hot
topic.
Since the stock market slide earlier this year, sparked by concern about
stretched valuations of tech firms operating with only virtual assets and
little or no profits, business chiefs are looking again at what makes a good
start-up partner.
``Incubators which have gone public can get really hurt if the value of their
holding company goes down,'' said Roel Pieper, partner at Insight Capital
Partners Europe, which has $1.5 billion in funding.
``How can they attract new business if they seem to be more preoccupied
with their own stock price?'' he added.
``PEOPLE'' FACTOR OUTWEIGHTS BRIGHT IDEAS
The notion that whizz-kids need to have their hand held as they embroider
an idea is losing favor among the new breed of venture funds, who say the
new buzzword is staff and time-scale.
``It used to be accepted that ideas were the prime differentiator but ideas
are a commodity, as is money. What isn't, is the ability to understand
momentum, bring the right people to the company and build the right team,''
said Pieper.
The new movers and shakers have networks of contacts and staff to get
the project moving quickly.
Katia Verresen is head of European business development at Garage.com,
a site which aims to being together venture capitalists, industry experts and
a closely vetted selection of would-be tech superstars.
``It's about who can open doors for you. Start-ups have to ask themselves
whether they really want to hook up with an incubator which is spending
million of dollars in rent to cover operations across Europe, or someone
who has a recruitment database and contact with their dream clients,'' she
said.
BEWARE FURTHER DOT.COM FALLOUT
As part of the legacy of what one executive called ''scattergun
investment,'' European venture capitalists predict the fallout from the
dot.com frenzy is not yet over despite a number of high-profile failures
such as e-tailer Boo.com.
They warn that the impact on the burgeoning European technology sector,
with fewer sophisticated consumers and a smaller capital pool than the
United States could be potentially crippling.
``It's a huge issue and I personally am very concerned -- the dot.com
mania in Europe was crazy because the market is less sophisticated and
the potential damage from failed ventures is worrying,'' said Pieper.
``The investment industry knows it is coming and should be pro-actively
looking to see which companies could survive together and act early.
Another boo.com would create big problems for the business climate in
Europe.''
NEW STARS, NEW MONEY
Yet amid the doom and gloom industry chiefs say good firms are still
coming through.
``There is no lack of funding for new businesses -- the issue is where the
profitability will come from,'' Stephen Muccetti, president of Scient, told
delegates at the conference.
While business-to-consumer remains out of favor and business-to-business
treated with suspicion, ``future hot investments will be enabling technology
and mobile infrastructure,'' Jackson said.
And as canny start-ups now concentrate on growth areas such as
networks and software, industry leaders are getting in on the act, setting up
their own venture firms to kick-start enterprises which could prove
beneficial to their core business.
Nokia and Oracle are just two household names jumping in, but the original
funds say they are not worried about the competition.
``Corporate partners are good at evaluating the technology, but not so good
at recruitment and can muddle their objectives with those of the start-up,''
said Verresen.
``Start-ups need to get the best of both worlds -- great partners and great
backing.''"
Morgan |
