WhatsApp and Candy Crush recently joined the big leagues of technology start-ups done good, prompting tech-shy investors to join the hunt for the digital giants of the future.
Family offices, wealthy individuals and even some institutional investors have begun to sift through the swaths of up-and-coming technology ventures in the hope of spotting the next big thing.
Christian Nagel, co-founder of Earlybird, a Berlin-based venture capital company, admits that European investors have in recent years suffered a “horrible experience” when committing capital to start-ups.
“Venture capital as an asset class has not been in investors’ favour, and investment volumes have constantly come down,” he says.
But he believes the high-risk, low-return dynamic that blighted early-stage investors is shifting.
“We have had discussions with our investors about whether the venture capital model is broken, and we find that family offices are among those who have realised that something has changed,” he says. “There is less capital chasing more opportunities.”
The recent flurry of young tech companies that have found success at an international level has spurred investor interest in digital start-ups, despite the fact that many investors were burnt not too long ago during the dotcom bubble.
Just last month King Digital Entertainment, the developer behind the addictive online game Candy Crush Saga, filed for an initial public offering in the US with the hope of raising more than $500m.
就在上个月，深受网民喜欢的在线游戏Candy Crush Saga背后的开发公司King Digital Entertainment，申请在美国进行首次公开发行(IPO)，希望筹资逾5亿美元。
Sina Weibo, a Chinese messaging platform similar to Twitter, followed suit last week by announcing plans to list on the New York Stock Exchange with a potential valuation of up to $8bn.
类似于Twitter的中国微博客平台新浪微博(Sina Weibo)最近也宣布，计划在纽交所(New York Stock Exchange)上市，估值可能高达80亿美元。
Social networking giant Facebook also recently surprised markets with its $19bn buyout of instant messaging application WhatsApp in what appeared to be one of Silicon Valley’s best-kept secrets.
While the odds of spotting the next Facebook are very long, investing in the next Airbnb, the accommodation website, or Farfetch, the online fashion retailer, is more plausible, according to Stefano Guidotti, chief executive of U-Start, a matchmaker for start-ups that puts selected small businesses in touch with angel investors.
He says: “Digital start-ups are disrupting industries from travel to accommodation to logistics – this is where you can really look for home runs in the investment space.
“Models that are growing at an incredible pace have the chance to become a billion-dollar opportunity, and [they emerge] much more frequently than companies like Facebook or Twitter.”
The one area that investors should steer clear of is the new breed of start-ups aiming to cash in on the buzz around alternative digital currencies such as Bitcoin, according to Matteo Rizzi, partner at SBT Venture Capital, the financial technology-focused firm.
聚焦金融技术的公司SBT Venture Capital合伙人马特奥•里兹(Matteo Rizzi)表示，投资者应回避的一个领域是希望借助比特币(Bitcoin)等另类数字货币所引发的热潮谋利的新型初创企业。
“This is potentially a very risky investment because the return could be very big, or you could lose all of your money,” he says. “It has such explosive potential because regulation could hit this sector very hard and kill it before it gets going.”
Rising investor confidence in early-stage technology and digital businesses has been helped by the development of vibrant start-up hubs beyond the US.
A cluster of businesses focusing on online marketing and data analytics has sprung up in Berlin, while London is home to a growing number of financial tech start-ups. Large entrepreneurial communities have similarly sprouted in Tel Aviv and pockets of eastern Europe and South America.
Mr Nagel says: “In the past most start-ups were in Silicon Valley or New York and you had to spend millions just to start developing. Now we see businesses popping up everywhere as you can develop and test an app overnight with little money.”
As a result, Earlybird recently launched a fund focused on early-stage businesses in Turkey, central and eastern Europe. It raised $110m from entrepreneurs, family offices and institutional investors including the European Bank for Reconstruction and Development and the International Finance Corporation.
因此，Earlybird最近推出了一只基金，关注土耳其、中欧和东欧的初创企业。这只基金从企业家、家族理财室和机构投资者那里筹资1.10亿美元，这些机构投资者包括欧洲复兴开发银行(European Bank for Reconstruction and Development)和国际金融公司(International Finance Corporation)。
Family offices founded by successful business people who made their fortunes decades ago have been among the first to realise that an exciting new generation of entrepreneurs has emerged, according to Mr Nagel. “This new breed of entrepreneur does not copy existing US business models, but creates something unique that can be expanded internationally,” he says.
Mr Guidotti agrees, pointing out that many family offices are particularly keen to invest in sectors they already have some experience of. Families with a background in the motor industry, for example, prefer to invest in start-ups in related technology, such as car-sharing or tracking devices.
“They see the opportunity in something they can control and understand better than a hedge-fund product, which has not necessarily brought the results they expected,” Mr Guidotti says.
Although investors are regaining confidence in the tech start-up scene, it is not fool proof. There is resounding consensus that roughly 15 to 20 per cent of even the most carefully selected businesses will fail.
To keep business failures – and investor discontent – to a minimum, venture capitalists and groups such as U-Start seek recommendations from accelerators such as Berlin’s Startupbootcamp and academic incubators that provide facilities, office space and mentoring advice to early-stage entrepreneurs.
Earlybird’s Mr Nadel adds that the main reason a business tends to fail is down to problems with the team dynamic.
He says: “We have declined opportunities where the idea was great but the team was so-so. The team needs to be really willing to create something, not give up first time a cheque from Google comes around. This is not about quick money – if you sell the company or bring it public, the team should stay.”