Sunday, June 01, 2008

New dot-com bubble, or great optimism? European VS US venture capitalism

venture capitalistI was reading an excellent blog post on, where the author was discussing mainly about the different topics that made the headlines of the Internet media last week. And then, he was speaking about the venture capitalism market in France. Indeed, funding is slow there, and it is hard for French start-up to make money nowadays, with the slow economy and that the hype around web 2.0 is not as big as it was last year.

Venture capitalism in the US
The fact is that I find this picture of venture capitalism so different from what I have seen here in the Silicon Valley. Here I see so many start up launching, money is really not a big deal since finding funds is really easy. Also, a lot of these companies are raising funds without really knowing how to make money out of their ideas. As said Loic Lemeur, the business model is not that important as long as the idea is great and your able to deliver a good product. He always speaks about LinkedIn that have been launched with no focus on how to get money out of it. The results is that investment in start ups is the highest since years in the

I believe it is true, that if you have a great product, you'll be able to find a way to monetize it, but I still have some concern (probably my European personality...) about all these companies coming up with no business model.

Venture Capitalism in Europe

In Europe, or at least in France, we have fewer capital, and VCs are more "traditional": they need a lot of data and figures to back up the potential of the start-up. This implies that European start-up have less funds most of the time than American's. This is probably a safer approach, because it is always very risky to give money to a company that don't even know how they'll be able to make money, but it gives less chances to the company to expand.

The fact is that you have two ways to interpret what's going on:
  • The US "style": the Internet is expanding so quickly, that there are great room for new actors with great ideas. As long as you are able to have an original product, you'll be able to make money out of it. On an investor point of you, you need to invest the most you can to give the most chances to the projects
  • The European "point of view": The economy is low, there was a lot of noise around the 2.0 phenomenon, but there is no real return on investment right now. Is it a good time to invest? What is important, is to be sure that these start ups will be profitable on a midterm timeframe.
What do you think? Do you believe in a new Internet crash? Or do you think that the Internet is expanding so much that it deserves all these funds?

In my opinion, from what I have seen of the mortgage market, the US investors love to invest in bulk, until something happen. This is exactly what happened with the mortgages, where they bought highly risky mortgages but with great potential margins, whereas they should have keep their portfolio of subprime products low. I wish that it won't happen in the Internet market.

Blogged with the Flock Browser

1 comment:

  1. Anonymous4:27 PM

    Don't ever create a startup in Europe. it's a pain. PR