Elizabeth Perry/White Bull:
Jean, you clearly have a wealth of experience doing business across borders. What’s your perspective on when and how companies should Go Global?
Jean Bourcerau/Ventech:
That’s a big question, and a question that we ask ourselves often. The first part of the answer is: It depends on your business model. The more you are trying to sell a standard product rather than a service, the faster you need to go global. You want to get the international recognition as soon as possible. … And it is not possible to achieve this sitting in your office. Traditionally, the US market is very dynamic, and now Asia is showing a lot of traction. … There are only benefits to making this move.
However, resources are critical. It is expensive to take your company into international territory. You have to allocate the right amount of money. For a European company, for example, to penetrate the US market, it’s often at least $ 3 to 5M. And anything below this threshold is useless, just wasted money.
The second point, is the management team. Can they do it efficiently? It takes a unique skill set and a management team that can think globally. You need to recruit valuable people locally? but even then it’s difficult to manage a team from 5K kilometers away. The best way to do it is to start with a strong management team and then gather the financial resources.
WB:
What are you doing to take on the global market? What’s your take on India vs. China?
JB:
Well, we opened an office in Beijing, if that answers part of your question. … We did also have a look on India, but in the end you can run only a limited number of initiatives.
The impression we have is that business is done differently in India. Maybe it’s closer to the way US or Europe do things, but it’s also built around services. … There’s a huge demographic. The next step for India should be about building products. In fact, in 2008, for the first time one of our mobile companies was acquired by an Indian firm, outbidding a US acquirer. … So, yes it’s happening, but we don’t see the same impact as with China.
What we see, and what’s interesting in the VC industry is a huge country and a huge market, but at the same time very centralized, which means it’s easier to identify entry points in the network … where the opportunities are.
Also, what we see in China is that they are very much into producing their own products. This creates wonderful opportunities for the local market. They created global champions in the telecom industry … but in the high tech industry, it is still very much focused on the domestic market. It has not been in the mindset to expand yet. When you look at the domestic market, there are 750M mobile phones,400 M internet users… And there is a great deal of entrepreneurship. Every Chinese businessperson is a potential entrepreneur … wants to be able to build something and take control of his destiny.
Another thing we see is that the typical Chinese company is often profitable from day one. The cost base is extremely low. And, they would rather change the business model to generate revenues, than take any losses.
WB:
Are there lessons to be learned from China?
JB:
Absolutely. We are busy helping many of our portfolio companies to expand into China, but also try the other way to license Chinese technology to leverage companies here in Europe. … We also have Chinese companies in our portfolio doing business in Europe. … The Chinese are particularly strong, for example, in the mobile phone industry. They’re paving the way!
WB:
How has the IT Communications Venture business changed over the past two years?
JB:
I think IT and Communications has changed drastically.. The new paradigm for the VC in ITC is leveraging the networks rather than building them. We had to reinvent ourselves, but the good news is that the playground has grown dramatically. … Indeed the whole world is transitioning to the Web, mobile transactions, creating venture opportunities.
When you are very deep into the technology, you need standards. This standardization process gave Silicon valley a formidable leadership by leveraging their “One-stop-shop” position in high-tech. But now you’re playing a different game. … It’s about usage, what the consumer wants to do, with lots of local input.
We have a shot at building global brands by thinking multi-local. For instance, think of the evolution of Enterprise software with the emergence of Open Source models. Software can emerge from anywhere, like MySQL, as the community of users grows on the web.
The Traditional model would have needed a cautious step-by-step geographic growth, monitoring the sales and marketing investment closely, with a high amount of risk. Now, the investment comes after the adoption of the software by the community, changing the whole dynamic.
WB:
How is the entrepreneurial spirit in Europe?
JB:
Well, another thing that has changed is the quality of teams out there. They have improved incredibly over the last ten years.When we think about what we’ve done over the past 12 years … some time ago it was nearly impossible to find people with startup experience. In 2010, you find one in every corner. Now you find people available on their 2nd, 3rd, or 4th ventures!
WB:
Noting that your firm specializes in life sciences, will the health care reform in the US for example, have an impact on the companies in your portfolio.
JB:
Well, these are extremely interesting trends. First thing is, big Pharmas rely more on biotech. Probably 50 percent of future products would have been originated in start-ups. The everall market is still growing, lots of 18 falls in the publc domain and pipelines need to be filled. It is extremely interesting to be an investor in this market right now.
WB:
In 2007, your company was named “Best Capital Risk Firm”by Capital Finance – Les Echos. How has Ventech lived up to that award over the years?
JB:
We were honored. … The year before that we received “Best Exit”. It was a good year for the Exits. Fundraising was important for the award also. We are continually improving, and spend a great deal of time on international development, expanding into other countries … Russia, China. We put a lot of effort into helping companies go Global. Ventech was instrumental for instance in helping business social network, Viadeo gain a leadership position not only in France but also in China and India, amongst other countries.
I think it’s important to remember that there are few spots out there in the so-called premier league of VC in Europe. They are being defined now. So, you have to enter now! That’s where we want to be. … That’s the game we want to play, and we’re confident that we are on the right path.
WB:
I recently interviewed Rudy Burger of Woodside Capital, who claims that “VCs often get it wrong” as it relates to preparing their portfolio companies for Exit. How do you respond to this? How do you get it right with regards to the Exit?
JB:
On the one hand, Rudy’s got it right. You have to be very close to the market. But there’s no one better than the CEO and the team to know how the market is behaving. … Companies are selling in markets one would not have thought of before. Very often the acquisition comes from people who want to enter a new segment. Not defensive acquisition. Unfortunately, two years in advance, you can’t necessarily think about this. You have to trust the executive team. On the other hand, we do have a big role to play in terms of timing. … On that front we are probably better than most CEOs and execs. We have a cooler view (from a less emotional perspective) and a lot of past experience. … The landscape is going to change. Who knows what will be happening a year down the road. …
One example is Musiwave. In 2004, growth figures were awesome, and at that point we were competing with other startups. In 2005, we got involved with two major players competing with Nokia,Microsoft and Sony. The game had changed. … At some point you have to ask yourself “Do we want to build and compete with the big guys, and, do we have the resources? …We won one and lost one. But we then decided to sell the company. From then, bankers are there to run the process on a given time frame. I don’t personally believe that people should work with bankers until two to three years before Exit.
WB:
Do you have any recent Exits you want to talk about?
JB:
MeilleurTaux.com was so far the best multiple for Ventech … with 17x … Alantos was another good one, in Life Sciences, with a $ 330 M sold to AMGEN.
WB:
Word has it that many VCs are struggling. How have you managed during the recent economic crisis?
JB:
We have come through this crisis by being entrepreneurs. … It has never been an option to stop … and we have continued to support our companies even in troubled times. Sure, we’ve failed some and made some mistakes, but for the most part, we’ve been successful. …
Sure we have fears that keep us up at night. We’re anxious about the availability of capital. European ventures did not deliver enough over the past ten years. The overall amount of money available for private equity is going down. And you’re addressing smaller pockets. … Yes, it makes us anxious, and honestly it is sad because it’s unfair to “say no” to some of these companies. The market for entrepreneurship is healthier than ever. So, it’s going to be great for survivors, but some teams will die.
WB:
What will you be looking for in Barcelona?
JB:
Well, we’ll look forward to a mix of good networking and having a look at the trends … new things popping up. Networking is extremely important. You need gathering points to get together face to face. That’s where deals happen. We’re happy to have some quality events that bring together quality people and energizing exchange.
WB:
Thanks, Jean. We’re very happy to have you on board and look forward to hearing more from you in Barcelona!