LeWeb: The Money Panel

Money Panel: Moderated by: Jonathan Goodwin, CEO & Partner J Goodwin & Co LLP

HN: looking at game sin Mobile, eg Rovio etc, one of the first investors in Facebook. Looking at next-gen ecommerce.
DM: mostly tiny incubator seed investments, one of the most active. over 120 deals in last 12 months. Biggest miss is Parse – missed the volume
JC: about 20 investments a year, 400k average, mostly in the US. a lot of mobile services, next-gen ecommerce
EA: invest in early companies throughout EU, still looking for a good French deal. Involved on mobile for a while,

Are they worried about debt crisis, underfunded IPOs? Looking longer term? YOu have to be worried about collapse if you want to continue doing business, but there is a resilience in anything you are doing. What is being done by EA is really long term; looking at studies, it takes 9 years from funding to IPO for average company. Average time for VC is 6 years, for decent investment. There is a disconnect btw investor expectation and reality, EA focuses in long term

At the moment, short term JC not seeing changes in microeconomics, but macro will impact at some point. HN thinks the flow of money will continue, there is a self-reinforcing mechanism in place, that investors make money with exits and it flows back into the investment. DM the environment has more impact on the LP environment, that is investment in investors, rather than VC investment in companies. THere are a few v large funds and a lot of smaller funds, they are the trend. A lot of VC are finding their models squeezed btw the very large and the very nimble and small.

In last 3 years, says JC, US venture has invested more than it has raised. A lot of transactions are in early companies, the employees on FB etc releasing their liquidity through personal deals. Last stage VCs are seeing more deals than used to, so more choice. DM, thinks it is positive, it is getting better environment, lot of positive reasons for investors to reason. One area to have a little concern is to look at valuations, a little overheated, across the board.
HN thinks the private companies are overvalued a little, instead of public companies. JC looks at public companies, that investors have lost money (on paper)

So what is going wrong if public companies not keeping value? HN says we are having worst crisis since WWII, so prices are not so great. So prices being lower is not to do with investors or banks going wrong, but general environment. But JG says that this sector has generally been good, so thinks there are too large exits which impacts the public deals. But DM says you can’t lump all the web together, lots of different perspectives.

One of the mistakes we need to learn from, says EA, is what is a bubble. It’s a disconnect btw the investors and the floaters. When the stock exchanges become an VC. They hate surprises (due to the model they work with, eg pensions), their views of what stock should be, the movements that should be happening, is different to early stage companies, that needs to work on infrastructure, such as managing outcomes. Looked at companies that have been made public and then look at infrastructure, a lot of work to get the processes in place. Companies can do revenues, but won’t be predictable, won’t suit markets.

JC says that what is happening, with Zynga etc, not there 3 years ago, so only a few quarters of data. Is the structure there? In mobile, says EA, we are yet to see that. There are a number of mobile businesses that are seeing exciting trends, that are getting ready to take advantage, so growth could be faster. An enormous platform for interesting biz opps.

Looking at returns, DM is looking in Asia etc. China is mobile phone largest market, inc smartphones. YOu are seeing dramatic growth in those markets. DM is now 25% international development, was 10%. JG asks if length of investment will be longer in these markets but DM does not think that. THinks that 6 years is too long, companies are having liquidity events before the IPO. DM average investment is 3 years, in 1-5 years is the normal for him. HN thinks the cycle will shorten. Businesses are growing faster than they have ever done. THinks mobile biz will grow even faster. DM thinks the cost structure changes have helped – you don’t have to spend a lot to start things, more being tried, then you can see the successful ones. HN sees massive trends you can take advantage of. JG knows that a that smaller end there is more M&A than before; seeing a lot more US corporates getting involved in EU, seeing a growth in this. EA thinks the big returns, for institutions, has been from the big IPOs. You have large amounts of money from institutions, getting big returns from IPO. There are also lots more smaller ones, from small VCs.

Looking forward to next year, hopefully Euro sorts itself, but what excites you? HM focusing on mobile, emerging economies. DM is looking at subscription verticals in commerce, eg coffee, condoms etc. Straightforward to go after, easy to go after, predictable revenue. Also looking at books, educations, for children, eg on ipad. Education was difficult to go into historically, but now you can go direct to consumer. Not been looked at as much, but it is huge and easy to get into. JC is in same geography, but very excited about mobile, building mobile equip of successful webservices. See about 50-60% of mobile investment. EA sees the same kind of businesses; always surprised by creativity of entrepeneurs. EA is EU focused; looking at Berlin, the place to go, Stockholm is brilliant, plus London.