Event Review: Tornado-Insider Upstart 2002 Conference Review, June 2002
By Bundeep Singh Rangar, COO, Ariadne Capital
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At the first Tornado Insider Upstart conference, more than 800 people descended on the EuroDisney in Paris and listened to the likes of eBay Inc.’s founder Pierre Omidyar and Garage.com Inc.’s evangelist Guy Kawasaki speak under the hue of large banners displaying names of bulge-bracket investment banks.

Sound-byte speeches were the hallmark as eager attendees scribbled down notes hoping to find some of the magic for themselves that had seemed to make everyone else paper millionaires.

That was, of course, two years ago at the first Tornado-Insider Upstart conference. Times have changed much since then.

“In 36 years of venture capital investing, this is the worst technology downturn that has ever existed,” said Joe Schoendorf, Partner at Accel Partners, at this year’s Upstart conference.

At conferences throughout Europe, technology tourists are fewer and theme parks no longer considered cool.

In a sleepy town called Noordwijk, half an hour from Amsterdam on the Dutch coast, the gathering of venture capitalists, entrepreneurs, angel investors and members of the media and academia had a very different mood. They were not looking for the smooth talking, name-dropping college dropout with a new idea pitched as the next eBay or Yahoo! There wasn’t much talk of investment criteria or the “new, new thing” either. The killer application, in today’s market, was pure and simple: sales.

“If companies are able to make money, regardless of whether they are Internet or telcos, then investors will make money,” reasoned Martin Varsavsky, founder of Einsteinet and Jazztel.

As customers become the new focus of growing venture capital backed businesses, it seems strange now that they did not appear on brochures of VCs and entrepreneurs alike in the frenzy two years ago. In contrast, the latest Wellington Partners publication has a whole section devoted to sales.

From a venture capital point of view, it’s easy to see its appeal. Sales for a portfolio company are the best means to validate a business plan. It’s the best alternative to capitalizing a company while investors remain shy and the best hope for an exit as large customers turn into acquirers of high-growth companies – notice acquisitions by Sun Microsystems, Inc., Cisco Systems Inc. and Business Objects SA in the past few weeks.

Why sales and not business development or strategic partnerships? The answer is simple: sales bring real, hard cash in the bank. Everything else is just the hope or promise of the same. It’s black and white. Do people buy what you sell? There is no half way.

To be sure, the back-to-the-basics mantra for investors and entrepreneurs did not come at the cost of showcasing new and innovative companies. The conference pulled in some 450 people from 19 countries who made the journey to listen and learn from speakers discussing topics as varied as biotechnology, nanotechnology, wireless, new funds, mergers & acquisitions. A Science-2-Market section profiled 20 companies that were spinning off research and development from academic institutions.

CMG’s Chairman Cor Stutterheim led the first day showing how he had shaped the 42-year-old company into a world-class IT services company with 13,500 staff. In particular, he talked about how he made an informed gamble on the growth of SMS and established a world leadership position.

A panel on first-time funds saw Lionel Anthony, Ariadne Capital Director, and founder of Cinven, Europe’s largest buyout fund and Causeway Capital, which he sold to ABN Amro in 1996 speak about the granularity of a hurdle rate with the poise of having raised 12 funds. TLCom’s Giuseppe Curatolo highlighted the differences between private equity and venture capital [science to art], while Nenad Marovac of Digital Networks spoke about his experience raising a fund in the middle of last year’s sliding stock market.

To counter the freeze in the IPO market, a panel consisting of WestLB’s Mark Maclean, Deutsche Bank’s Markus Boser and Lionel Anthony discussed private equity as an alternative source of funding. It also discussed the hypocrisy of the differences in valuations for similar private vs. public companies.

Moderators for the panels included Claudia Blumhuber of Global Startup, Suresh Patel of Verdexus and Bundeep Singh Rangar of Ariadne Capital.

In the end, the mood of the three-day conference was perhaps best captured by its slogan: Determined to Win!