Angelo Bonomi: The amount of seed/VC investments is apparently considered as a measure of success of seed/VC activity. Statistics, however, show the majority of such investments are loss-making. Scherer and Haroff, in a statistical study published in 2000 on 1,000 German patents valid for at least 10 years showed less than 10% were an important financial success.
But important returns are necessary to seed/VC to assure a medium to long-term vitality. It is a good indication how low the rate of success is and how long is the time necessary to assess an innovation’s real, large, positive socio-economic impact. Seed/VC in Silicon Valley originated from the availability of numerous radical technological innovations since the 1970s, and since the turn of the 21st century is now chasing previous successes.
But where is the new wave of radical technologies? Is seed/VC an important way to assure technological and economic development in Europe? Since the 1980s Europe had been trying to transfer the Silicon Valley experience with its start-up/VC system. After more than 30 years, where is the European Silicon Valley? Is the Silicon Valley experience a single, unrepeatable phenomenon in technological innovation?
There are important limits to seed/VC development as such financin needs a very strong return on investment but the rate of success of VC seems to be only slightly higher than typical investments made by industry through research and development (R&D). VC firms invest in innovations with large global markets, but are electronic gadgets with global markets the only technology innovations we need?
When considering the future of seed/VC, it is necessary to reason in term of open innovation. Open innovation is not an invention of some business school but the natural evolution of R&D activity. Currently, open innovation offers many ways to develop new technologies and the VC/start-up system is only one of these ways. A start-up is a company but it has all the characteristic of a project with the aim of developing a business model suitable to the concerned technology. Start-ups can also be a good way for industry to develop innovations. The future of seed/VC, therefore, will depend on the evolution of open innovation and will probably remain of marginal importance.
Trudi Schifter: Any kind of venture capital is a very specific funding that requires the potential to build a $300m company. It is very expensive funding in terms of own-ership and control and is a business of exceptions, the home-run deal. This does not fitmost start-ups but instead very few.
Mark Montgomery: For consumer internet plays in Silicon Valley there is seed capital chasing previous successes, primarily in one ecosystem of relationships. That makes a lot of noise – so one reads and hears a lot – and cre-ates quite a bit of wealth, but limited to very few in a very large economy invested in many types of research and development.
Seed capital is only one of about 14 of the elements essential to venturing. Without the other elements, for example follow-on funding, it will be lost. And even in popular social networking, it is entirely dependent on massive investment long before the first penny is paid back. Amazon required several billion in investment – and that was funded in the dot.com bubble.
Entrepreneurs should not mistake financial engineering for business building. The former can allow the latter, but it has little to do with the entrepreneur, technology or business. It is considered predatory capital in the small business world.
I see quite a bit of new technology that has potential. The problem is the power of global companies in markets, as well as governments and other institutions (academia and non-government organisations). They favour working with other institutions, not start-ups. It is far more difficultand expensive to gain adoption of emergent technologies than ever before. Creative destruction in the west is nowhere near the priority that protectionism is. The European Unon does a better job than the US now in some respects as they officially admit the weakness and have at least attempted to address it, but it is very political and bureaucratic.
Most of the discussion here about Silicon Valley is based on a very thin slice of reality that is almost certainly not available to the majority of entrepreneurs. Global seed fund activities are more appropriate for traditional, non-tech business, and certain types of business that are not as dependent on location. The problem is not generally networking. Indeed that is part of the problem as everyone is trying to make money from entrepreneurs and seed investors, including governments that depend on the jobs they spark, but what is really needed are customer cultures that embrace new and regional versus old and global.
Nothing else has seemed to work, and that is famously not occurring in Silicon Valley like it once did, or anywhere else in the US. Seattle, Boston, San Diego all support global companies first, which is a huge change in one generation, and a contrast with China.
Michael Faulkner: Seed capital investing is in transition. Markets merge, grow and then mature. The question is more where the market is for seed capital in Europe and whether it can have an impact on moving technology forward. The [continental] European market for seed capital lags behind the US and the UK. Technology, however, does provide us with the opportunity to catch up and do so quickly.
Seedups.com is an online platform recently launched in Ireland and the UK. We launch in the US at [last month’s] SXSW conference.
Luca Rossettini: I have just signed for a €300,000 seed investment from an Italian venture capital firm so it is difficult, but not impossible [in Europe].
What really surprised me are the different rules of the game: term sheets and negotiations usually done in US are not regular here in Italy. The common perspective is: "You are lucky to have found the money, take it! Your alternative is the bank."
Matjaz Gros: Hopefully there is some good news in Slovenia as the govern-ment will double the sum of money given to fiveVCs and they need to spend it in fiveyears mostly on businesses in Slovenia. I understand €70m is to be invested in this period, which is a substantial sum of investment capital for a country with two million people. Also, some local business angels have been active here in the past few years but many of them slowed their activities in 2009-10 due to serious meltdowns in their personal wealth.
Jake Jephcott: Poland has a few well established and functioning angel/seed organisations. As a former emerg-ing market, Poland is riding on the crest of tech investment and the number of technology parks currently in develop-ment in just the north of the country is astonishing.
Geoff Roach: A study was done at MIT [Massachussetts Institute of Technology] a few years ago that said no major innovation ever came out of a company with more than 500 people. Start-ups need to exist to supply the innova-tion, which comes in lots of different ways, not only tech-nology but also distribution and business models.
Gianluca Dettori: I am doing a fellowship at Stanford with the Kauffman fellow programme. I am conducting a fieldproject, a research on mini-seed and incubators models in US and Europe. The study will also be published by Tech-Cocktail. So far, here are the European initiatives we are tracking:
OpenFund Seed
Rocket Start
VISpringboard
Startupbootcamp
NDRC’s Launch Pad
The Difference Engine
HackFwd
H-Farm
The Greenhouse
Maverick/SeedCapital
Seedcamp
etuan Valley
Startupbootcamp
Aalto Bootcamp
dpixel – Techgarage
Wadi Ventures
Jaina Capital
InitialFactor
Speedinvest
White Bear Yard