One of Europe’s original Transatlantic venture funds, Atlas Venture, is consolidating in Boston. The redoubtable Fred Destin will relocate where he will focus on levering his European experience by building US companies. Christopher Spray, Managing Partner of the European operation will remain in London to manage the European portfolio. Graham O’Keeffe and Regina Hodits will transition to Venture Partner roles.
Atlas Venture
We wish everyone the very best and I have no doubt that some of the key actors in the Atlas team will go on to greater things. Atlas Venture have been active investors in Europe for many years making some notable investments in pre-dot com days and many entrepreneurs have benefited from their money over this time.
Whatever the positive spin that might be put onto this, this is sad news for the European venture ecosystem. It is much harder to deals at arm’s length with investments and will almost certainly mean that less money is invested in European entrepreneurs.
The move is not really a surprise however. The team in Europe has (allegedly) struggled to raise a new fund and positive exits have been hard to come by – most recently Koodos was bought by before Christmas for pennies in the pound by e-Trader Group.
Ironically, it has proven hard for almost all venture firms to build scalable businesses. This news confirms that venture capital, for all its focus on entrepreneurs with global visions and relentlessly scalable value propositions, remains what is essentially a cottage industry. Accel have managed to operate successfully on a semi-global basis (US, China, Europe) but almost all others have failed to do so in a single firm. (Benchmark opened a European office for example which now operates independently as Balderton Capital in Europe).
Is venture capital by its very nature an unscalable proposition?
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Mark, we have been scaling down for a while. I do believe venture is hard to scale. Those that manage it well build local teams on the back of a common brand, not distributed global teams. Pesonally, I like it smaller, I don’t think VC’s should become too much of an institution.
I have been aware of some of the moves but still sad to see this although delighted for you personally. I personally think you would make the European all star VC team and you will do great things in the next phase of your career.
VC is not inherently scalable, the top quartile firms are so reliant on the individuals in the fund and they cannot be in all places at once. As VC funds grow, they all have significant issues as they build head count, get larger funds (bigger funds mean bigger management fees and bigger investments) and try to cover more territories.
This is more evidence that Schumacher might have had a point – Small is Beautiful.
Atlas failed to make money in Europe for the limited partners by dooing silly deals they could not exit out of. Clickmango anyone? Thought not. Big US investors always fail when they come to the UK. They only move here to puff up the size of their funds so they get bigger fees. Eventually they all get found out. Benchmark pulled out, DFJ pulled out etc All found out in the end.
Wow. JS (just stupid?), so unutterably wrong I will keep your comment there as an example to us all.
Clickmango was founded at a time when a lot of people were doing rash things. It was founded by Toby Rowland who then went onto found King.com and then MangaHigh so it is fair to say his entrepreneurial record has been pretty good.
Benchmark Europe separated from Benchmark and now, in the form of Balderton are one of the top European investors. DFJ never really came to the UK, their model, in most of the places that they operate, is a partner model, initially with DFJ eplanet and latterly with Esprit in the form of DFJ Esprit.
While it is always a temptation for funds to raise larger funds as the management fees increase, there comes a point when the fund is too big to do what it was doing and it becomes a buy out or late stage fund.
Does beg the question what the right size fund is.
Too small and you generally don’t get to attract and retain the right quality of people (unless of course it is some sort of angel/entrepreneur fund) of which we will see more and more.
Too big and you simply cannot invest in early stage businesses.
I personally think £100-150 million is about the ideal size in the UK.
We are all on the horns of a dilemma well articulated above.
Big attracts talent, but it dilutes accountability.
Realistic expectations for those working in the industry are important, but equally important is a little more transparency around career path for those who want to do this.
Our stakeholders are our shareholders and our entrepreneurs. We are at their service.
The VC industry must attract people who find that as exciting as making a significant return.
NB. Interesting comments but this is the first blog comment I have edited because there are some things that may be a bit dodgy from a legal perspective. We accept your right to make points but just don’t want the hassle of being in the middle of a fight that we are nothing to do with.
There are some very good sub $50,000,000 funds and some ones that you should only speak to if you want to give up.
The best small funds have some of the following shared traits.
They have very experienced entrepreneur founders
They focus on a single sector that is well known to the small management team
They treat entrepreneurs as fellow human beings who can do something great with the investors capital and expertise
They are not investing for the management fee – often the money is theres anyway
They probably dont NEED the money they are investing, but it is important that they dont lose it
Examples include European Founder, Amadeus little fund, Pentec, TAG, Notion, ProFounders
The worst ones
Are low rent people that need the management fee and think the fee on a 20 million fund is enough
Invest in multiple sectors which they know FA about
Take fees from companies they invest in for helping them raise other money, take money for board seats, monitoring fees and all sorts of other stuff
Will block later investment in the compnay if it means they lose control of the business
The very fact that they invest will probably mean you are doomed in the first place
are propped up by some govenrment money of some sort
Have not grown and exited a business as an entrepreneur so see entrepreneurs as meal tickets
Examples inclide XXXX, most (ML – not presumably all?) regional venture funds, lots of VCTs who wont invest anyway. Also avoid the supposed angel networks that charge fees upfront to present – XXXX, XXXX, XXXX etc unless you are desparate and have no other options.
Reference ANYONE you take money from and ask hard questions
Hey Mark – thanks for clearing up the misconception about DFJ Esprit above.
Re VC funds scaling, the DFJ approach is an affiliation of funds which deliver on the promise of global networks and local funds. DFJ Esprit, like all the other DFJ funds raises its money locally and is a locally owned and managed partnership, but we operate as a global network of partners sharing a portion of our economics and getting together regularly on the in person, on the phone and via web and email groups.
Nic,
I did think about removing the post but it amused me that someone could be so utterly wrong. Amazed they had the intelligence to find such a well crafted blog…
🙂
In my view, the DFJ approach is probably the smartest/only way to scale a venture capital business globally as you retain local knowledge and ownership whilst sharing brand and marketing. This is a different thing though to being a single global fund.
VC’s can scale. But it will happen only by creating a market/community/network of entrepreneurs who’re investing in startups in a collaborative environment. Funds will be best allocated when I, you or anyone can put in a 100 dollars into any business listed on this online marketplace for venture capital.
Ideas are worthless, execution is everything. If you want to ‘organize the world’s venture investment’, steal this idea. 🙂
JS posting is disappointingly naive and weakens the benefit to be derived from blogs for all.
I wish you well in Boston Fred, see nothing negative in retrenching geographically if it results in a stronger business – something I feel sure ALL VCs would want/advise those businesses in which they’re invested.
In the current economic climate it simply doesn’t make sense to spread your business / fund / management / skill base etc too thin.
Of Fred, I agree with Mark – who at least posted his name in full… Likewise DFJ, the posting from JS is ill considered and poorly informed / researched. Better not to comment than to comment in ignorance.
Scaling internationally? VCs bring experience and knowledge to their investments as well as money – money is global, experience and knowledge needs to be specific and local to the investment. Not geographically, but intellectually. Enterprises operating in the same market but geographically distant have different challenges. In consequence each requires a VC with commensurate experience and locality. This doesn’t engender globalisation……
VCs do not exist in a void. I like to think of them as oil prospectors going around the world looking to strike (black) gold. A bit poetic but essentially with entrepreneurs it’s not a chicken and egg problem, entrepreneurs come first, VCs follow.
Having worked across North America and Europe One of the problem that I have noticed is the low number of startups in the UK (compared to the Bay Area, Boston area etc) – not to mention the continent. At the end of the day you want to be near your suppliers/customers and VCs are no different than any other company.