The European start-up scene. It’s finally working.

What a difference a year makes.

Last April, I posted that:

Europe has always had problems gaining start-up momentum – there’s no epicenter, there’s no critical mass- and there are no Heros.

The Wired 100 list has gone a long way towards making 100 heroes visibile. Big applause for the Wired team. This year’s Wired 100 is on stands now – one person I was happy to see on the “bubbling list” – John Taysom. He’s an awesome guy. I’ve got a few other personal favorites that aren’t on the list yet, but I’ll cheer for them in silence… oh, and obviously congrats to everyone that’s on the list.

Europe *has* a start up scene now – and fortunately for me – most of it revolves around London. Spotify, Mind Candy (Moshi Monsters), Soundcloud – all amazing companies are doing well on a global stage. Young startups like Groupspaces or Lightbox (go David, go Thai) are popping up and getting funding from tier 1 investors.

I could count on one hand the number of hot European startups two years ago. I can count them on two hands now. I might even have to throw in a toe or two as well.

Silicon Roundabout is real now – thanks largely to initiatives like techhub. Seedcamp continues to expand it’s footprint and pulls together the who’s who of the European start-up world during seedcamp week each September. There’s an event this weekend spear-headed by Songkick for developers – silicon milkroundabout. Sign up for it here. This just wasn’t happening 2 years ago…

There’ve been some interesting companies getting acquired -M&A activity is picking up significantly – and money is getting returned to investors in Europe. But, we need to see more high-profile European IPOs. Skype is grabbing for the ring, just got bought by Microsoft for a cool $8.5bn, Daniel Ek at Spotify is (rumored) to be gunning for an IPO. (That would be awesome if you did Daniel.)

All of this is coming together to make London a hot spot. It’s a great time to be here… (plus the weather’s really great this year). One more turn of the wheel and I think we’re there –

hot or not?

hot or not?Facebook is going to be irrelevant in 10 years time. Google has lost the search war. Microsoft has lost the desktop war.

We live in exciting times. Change is in many ways the only constant we have. I started the post with what many would consider heresy- if you don’t believe me, or disagree, you have forgotten the rise and fall of all tech companies.

Altavista. Yahoo! – these were the kings of the search engine mountains before a little company called Google arrived. Google was the king of search on the web, and I would argue they still are. But they’ve already lost the mobile search war… Foursquare is far and away my favorite mobile search tool – I need to find a place to eat nearby, figure out if it’s good, and then move on to my next stop. Google fails miserably at this task, and fourquare shines…

Facebook connects you with lots of people you lost contact with 10 years ago. You’re so excited to reconnect. And then you remember why you forgot about them: “Just gave kitty some more milk!”. Yay. Please kill me now… I posted ages ago that the future of the web was all about privacy and intimacy… group chats are still trying to figure themselves out, but current examples are beluga or groupme. They’re amazing and very useful for communicating with small groups of people that matter. I’d be willing to bet you spend more time in this class of apps in 5 years time than on Facebook (or rather that anyone under twenty will. That may or may not be you in 5 years time.)

Finally, in my mind, there are two reasons we use any given app or service 1) raw utility. it works, you use it. Wikipedia is a great example. 2) peacocking. Part of what makes apps gain great popularity is an ability to make a user appear cooler than his/her peers. Using facebook 4 years ago was very cool, very cutting edge. Today, you’re one in 500 million. Using beluga? Congratulations! you and many thousands of other people are using it too (oh wait, facebook acquired beluga. smart move. maybe it will take a little longer to become irrelevant)…. Using google 10 years ago gave you a search edge, today, you’d better be using Quora, etc.

The list of companies is endless, but one of my final favorites is Myspace –> which has been replaced by Soundcloud…. a large part of my job is to try to figure out what’s hot next… the problem is no one can actually see beyond the event horizon. The mobile is a huge disruptor right now – and is driving the up and coming companies I’ve mentioned in this post. It’s a fun game to play, trend spotting and finding cool, useful apps… if you’ve got favorites as well, post them in the comments, or send them via twitter @jasonball. I’d love to know what’s hot. or not. but please don’t send me a note about geocities.

Think Small

Ok, you’ve finished the Thoughts on Entreprenurship series and you’re thinking:

“This doesn’t really work for me.”

I’d say you’re probably right. Thinking big and shooting to be the next Twitter isn’t for everyone. So,

Think Small.

Don’t raise external money- bootstrap. Don’t hire A-team players (don’t hire anybody for that matter). Don’t go to a hub – work from home. Don’t do any of those things. It’s OK. Worry only about launching, making the best product you can with limited resources and get profitable as quickly as you can. This is really the equivalent of a base hit vs a homerun. And for many businesses, and people, it makes sense. Maybe you have a day job that you *want* to keep (or need to keep), no problem. Run something in your spare time. If it starts to grow nicely, you can always leave your day job to run the business. Or not.

By keeping things small, you maintain control and flexibility. But small now doesn’t mean small forever; but it does mean you can take your time. Just be sure to get your product or service out the door as quickly as you can.

A quick story (no names for this one) to illustrate my point: A model airplane fan in one European country decided to start importing planes from China and selling them on eBay locally. He started small- buying only 10 planes or so and then reselling them. Once they were sold, he bought more- 100, then 500, then 1000, and so on. The business is now turning over 7 figures a year, with a very healthy profit. He runs the business with his wife out of their home outside of the Capital. The company will never make the front page of the Wall Street Journal, but it’s a *great* little business.

I recently launched It’s a small site that sells bicycle tires. Was I looking to start a big business, with big money and a big team? Nope. It’s small, it’s me, a few tires, some boxes and a printer. Total cost to launch- maybe $200 (I bought a good printer). Will it grow? I hope so… Do I do love it? Absolutely. Am I wearing 700x23c cycling jerseys on all my rides? You’d better believe it. (Side note to the non-cycling geek: 700x23c is the size of a road racing tire. If you ride a road bike, you know this number. You might even know what the “c” means). It’s a small project that with a little tlc may just become like the airplane business above, and turn a nice profit.

So I practice what I preach to some extent; I think small. (but try to think Big during my day job).

Good luck with your business-  which ever road you take…

Exit trends in 2010

January… a month for reflecting and prioritizing the new year.

I always kick off the year with a quick retrospective of M&A activity, with graphics thanks to my friends at ICON Corporate Finance, based here in sunny London.

This picture says it all:

Average exit valuations have returned to pre-recession levels, above 2x sales, and are outstripping the ratios seen in recent years. In the UK,  the highest multiple was Moneybookers, which sold at 9x sales. In the US, both Facebook and Groupon made headlines with their paper valuations at $50bn and $6bn, implying multiples of 25x and 12x, respectively. (Remember that Playfish was acquired by EA in 2009 for $300M, which was reported to be 4x revenues.)

While Facebook wasn’t an exit, and the Groupon offer was just that – an offer, 2011 looks like it’s going to be the Year Things Change. There are numerous venture-backed companies generating $100M+ in revenues that are going to IPO (some of our portfolio included). The NASDAQ was up 17% over the course of 2010, and 2011 is starting off well. My employer, Qualcomm, has already announced a $3bn acquisition of Atheros this month. Linkedin, Skype, Zipcar, etc. are all teeing up IPOs this year. I’m very bullish that 2011 is going to be the year we’ve all been waiting for. VCs and Entrepreneurs alike.

Hold on to your hats.

Iterate and Innovate

Once you’ve launched your product, you’d better be ready to change it. Listen to your customer (or users), they will tell you what they need. Make changes accordingly.

You have one goal in mind: to build the Greatest Product you can. It’s all about building a great product – that’s one that I’ve borrowed straight from Rolof Botha.

Examples of kind of crappy first products are plentiful: iPhone first gen (vs the 4G that launched last summer). Apple listened to its customers, and refined the product. They did exactly the same with the iPod (which was more like the iWhat? back when it launched). Spotify is a great example of a company that has taken Europe by storm because it’s a Great Product (mobile product is not great though. which is too bad…keep working on it guys).

Keeping things as simple as you can, then adding features is a great way to be successful- again, back to Twitter as an example. It’s a simple service that has evolved over the past 3 years- Twitter has iterated and innovated (they’ve come up with completely new ways of handing all that data). They obviously didn’t worry about that when they launched – hello Blue Whale of Death- but they figured it out (mostly).

Copy these great companies, ship your product, then iterate and innovate quickly and continuously.

Ship Product

Guy Kawasaki wrote a great book a few years ago- The Art of the Start. One line really stuck with me- “Don’t worry, be crappy”. He also stressed the importance of shipping product. I couldn’t agree more. Don’t worry about getting your product or service perfect- just get it out the door. Europeans are famous for tinkering things to death and analysis paralysis. Just get something out the door. I’ve been putting together a cycling business- 700x23c. Is it commercially ready? Nowhere near. Is there a blog to start generating relevant traffic to my domain and give me keywords to start analyzing? Absolutely. Is the design perfect? No. Do I care? Nope. I’ll fix it later. Will it be perfect ahead of a commercial launch? No, it’s a hacked together Amazon Associate business right now. Did l I launch with an ugly website- Yes, I did. I’ve already changed it several times. (And luckily, everything relating to bicycles, except for Rapha’s website, tends to be dead ugly.)  Will all of this change over the next few months? You better believe it.

Shipping product is your 2nd most important milestone (after fundraising)- again, straight out of Guy’s mouth. And I agree wholeheartedly. And the next Big Milestone you’ll reach is Profitability.

Let’s think about *the* recent success story- Facebook; Facebook was a complete skunkworks project designed for Harvard students. Nothing was big or glamourous originally- but it existed. The founders got a product built and out the door. They started to worry about features and what to do with it once it was in the wild. They also changed the concept significantly after launch, which I cover in the next post- Innovate and Iterate.

But before you worry about that, you’ve gotta launch your product. And if you can launch long before you go anywhere near a VC or Angel, the better.

Get shipping.


In case you’re wondering why 700x23c is just a blog vs a commerce site, that’s because after I set it up, launched it  and ran it for about 6 months, I recognized that it didn’t offer anything unique to customers, so I killed the project (I had a set amount of funding for it), and reverted it down to a blog based on cycling. I’ll do something cycling related with the URL in the future, but for now, it’s just a blog. Key learnings from the experiment were: Magenta is a good ecommerce platform, payments integration is *tough* for the little guy and in ecommerce, you’d better have a very good value prop. Rapha, as highlighted above, offers a unique product that you can only get from them. I’m still toying with the idea of custom tires- but getting radials manufactured is a little more complex than getting jerseys sewn together…. it’s still something I’m keeping in the back of my mind.

Visit the Valley

Greetings from California! This is the third post in my Thoughts on Entrepreneurship series.

If you’re not based in the Valley, you need to get here as fast as you possibly can. No, really.

If you haven’t seen, smelled and tasted what the Bay Area is like, you have no idea what I’m saying- and you won’t until you do. The density of connections, and the ability to Get Things Done is amazing. Buy a ticket, spend a week networking and you’ll leave a new man (or woman). But don’t stop there, once you’ve been (you’ll see what I mean), you need to plan on visiting at LEAST quarterly for 1 week; 2 weeks if you can afford it.

I bumped into Andy McLoughlin, co-founder of Huddle at an event on Sand Hill Road earlier this year. I was delighted to learn Huddle had raised $10M from Matrix Partners and had recently re-located to the Bay Area from London. Huddle, if you don’t know them, are becoming a great European success story- they had really good local investors initially (Eden), and thought big.  Plus, they even established and ran what is one of the most successful entrepreneur events in London- DrinkTank– which in a way created their own epicenter and network around the company. Andy was giving a talk on what it means to be an entrepreneur in Europe, and making the transition to the US. He practices what he preaches, and he’s a believer in the Church of Silicon Valley.

I’m a believer as well. Make plans to make your first pilgrimage- go Visit the Valley…

Think Bigger

Now that you’re inspired to Be like Jack– you need to start thinking LARGE.

Jack was fortunate to have top-bill investors, why shouldn’t you. Jeff Bezos and Fred Wilson were early investors- find the equivalent wherever you are. Great investors can open many doors for you- they can also provide mission critical advice. They also don’t flip out if things don’t go perfectly – remember, Twitter only announced a revenue model in the last 6 months… they’ve now raised north of $100M date from solid investors. Do the same if at all possible. Also, since you’re raising a lot of money, hire the *BEST* people you can. People that are smarter, faster and better paid than you. It’s been said before, but A teams attract other A players. B teams attract B players… if your idea is great, you’ll be able to raise good money and attract top talent. This is a very important part of growing your business.

Also, location matters. Find the hottest spot you possibly can to build your business. The density of connections in the Valley are well documented, but there are other hot spots if you can’t launch there. And if you can’t launch there, you seriously need to Visit the Valley (next post). New York is developing as a great hub now, London is doing very well over in Shoreditch (check out Techhub)- you significantly increase your chances of success by being in the best location you can… Yes, the world is flat, but talent tends to live where it’s happening. Get there if you’re not there already.

A great London example of raising big amounts of money, scaling quickly and seeing a good exit is Playfish. They raised $17M (big money) from Index and Accel (great investors), then sold the company to Electronic Arts within 18 months for $400M. If don’t think you can do this, you might want to re-think what you’re doing…

You need to Think as Big as you can.

Raise Money (Be like Jack)

This is the first installation in my Thoughts on Entrepreneurship series. It stems from a talk a gave earlier this year in Bilbao… Up first is raising money.

Raising money is probably the most important step you’ll take in your business. It will probably take longer than anything else as well- *especially* if you live in Europe. You need to plan on a minimum of 6 months to raise funds, although 1 year from start to finish is very possible. Don’t sweat the valuation too much. If this is your first start up, you’re not going to get a great multi-million dollar pre-money valuation, nor a lot of cash up front. Sure, if you’re Jack Dorsey, you can raise top dollar at $40M pre, but then if you’re Jack, well, let’s just say that’s where you want to get to…

Raise as much money as you can. It is true that raising $5M is just as easy as raising $500k. Don’t worry about your “dilution”. Go for the gold. Think bigger (my next post covers this point). Raise the biggest amount of money you possibly can to execute as quickly and at as large a scale as you possibly can.

The other thing to remember is that you probably won’t be there when the company is sold anyway, so really, don’t sweat the valuation and your %. As they say, 1% of something big is better than 0% of nothing. A basic rule of thumb is that the *team* will hold around 5% of the company at exit. This percentage varies wildly, but it’s very important for you to keep in mind. I’ll use Jack Dorsey as a great example here. Looking at Twitter’s funding evolution:

Total funding raised is $155 million. $5 million was raised in July 2007 in series A funding from Charles River Ventures, Union Square Ventures, Marc Andreessen, Dick Costolo, Naval Ravikant, Ron Conway, Chris Sacca, and Greg Yaitanes. In May 2008, Series B funding raised $15 million from Union Square Ventures, Bezos Expeditions. Spark Capital, Digital Garage, Kevin Rose, and Tim Ferriss. In February 2009, Series C funding raised $35 million from Benchmark Capital, Institutional Venture Partners, Spark Capital, Union Square Ventures, Charles River Ventures, and Digital Garage. A series D round held in September 2009 raised $100 million from Insight Venture Partners, T. Rowe Price, Spark Capital, Benchmark Capital. Institutional Venture Partners, and Morgan Stanley. Via Technology Review

That initial $5M would have bought anywhere between 20-50% of the company, for a post of $10M to $25M.  A $5M Series A is pretty spectacular, and even a $10M pre-money valuation for twitter would have been a good result. Fast forward 2 years though,  and out of the gate Jack raised $10M for Square at a rumored $40M pre-money valuation (box standard 20% dilution). The point is that Jack’s been able to raise more money, and at a higher % valuation- from day one.

You need to plan on doing the same- if you’re an entrepreneur, you’re probably going to a be serial entrepreneur. What matters is that you get out there, raise money and put a serious score on the door; and then do it again.

Be like Jack. That’s your mantra…