Transparency, Accountability, and a Focus on Sales and Talent rather than Capital alone are Key

10 March 2004, London, England

Europe is under threat as never before. It is not “Le Defi Americain” written about by Jean Jacques Schrieber in 1968, but globalisation which is forcing the average European employer and worker to compete with their counterparts on the other side of the planet. Regulating labour laws is a stop-gap measure. What needs to happen to revitalise the European economy is that the average European needs to want to contribute to its growth story; if we focus on being net contributors to the system, rather than net-takers from it, we will see the difference. Ariadne Capital believes that venture capital can be a force for growth. The best investors know how to align objectives of all of the parties who can have an impact in creating or destroying value.

Twenty five separate regulatory, tax, language and business environments slow the scaling of start-ups in Europe, where failure is too frequently viewed as a terminal condition, rather than a vital part of becoming a well-rounded manager. In general, many founders of businesses in Europe are conditioned to believe that they don’t have the skills to become world-class CEOs. Too few Chief Information Officers in corporates are willing to give young private companies a chance; it requires on their part a significant ability to manage risk. Overall, there is far too much focus on the capital rather than the markets and the talent which animates it. Rather than be considered a matter of luck, deal structuring should be a process of determining fair rewards to all stakeholders in high-growth ventures.

“Aspiring entrepreneurs should play to win. Too frequently young professionals in Europe are conditioned to believe it’s better to play not to lose,” said Julie Meyer, Ariadne Capital’s CEO.

"While the European Commission's stated agenda is to make Europe the most competitive economy by 2010, regulatory obstacles, ostracization of failure, arcane bankruptcy rules, inflexible labour laws, and an aversion to marketing and selling threaten to make Europe the opposite of it," said Bundeep Singh Rangar, COO of Ariadne Capital. "If Europe doesn't commercialise innovation like the U.S., or manufacture as efficiently as Asia, it will be stuffed at both ends."

The US economy - where venture investment is already climbing again - has reaped huge rewards from a virtuous circle, where new venture capital funds created by technology entrepreneurs as well as from financial institutions are reinvested in new technology with the active involvement of those entrepreneurs. This has underpinned successive waves of innovation that have propelled the US high tech economy to its global leadership position.

Nick Ogden, an Ariadne Capital Investor, who founded the internet payment system WorldPay and the soon to be launched On-Instant network, says, “Like myself, it’s often entrepreneurs with technical backgrounds that come up with the original idea for a new company. It's vital that these individuals are helped subsequently in three vital areas - selection of the right people to grow their company, forming the best partnerships and closing the right early sales to ensure that growth is sustainable."

Rangar concludes, “Venture capital's natural habitat is innovative sectors which are by nature risky and idiosyncratic. High levels of both financial and entrepreneurial skill must be combined to really make the money invested work to its fullest potential to build new economies, create employment and systematically engineer profitable, successful exits for those shouldering the most risk – a brand new generation of European entrepreneurs.”

About Ariadne Capital
Ariadne Capital invests in early stage private companies and advises later stage private and public companies undergoing significant growth or change.

Founded by 24 top European entrepreneurs, with 12 nationalities on the team, offices in both London and San Francisco [opening later this year] and deals completed on three continents, it offers global reach to its portfolio companies which include: NanoMuscle, Navio, and Intamac.

www.ariadnecapital.com

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