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VC secures sales for start-ups, including online casino By Madeleine Acey FT Investor, 15:20 GMT Mar 8, 2002~ LONDON (FT Investor) -- High-tech venture capital is a tough game these days and one player is taking a practical approach to secure revenue for itself and the start-ups in its portfolio. London-based Ariadne Capital says it doesn't like to take the high-risk scatter-gun approach that many did in the dotcom boom era. Rather than investing in 10 companies and hoping one or two would be stock market stars, Ariadne has become a sales agent for its clients. Bundeep Singh Rangar, chief operating officer, said the company was using the valuable network of contacts its executives had built up throughout their careers as investment bankers, finance journalists and the like to put influential technology buyers together with technology sellers. Ariadne looks for technology start-ups for the venture capital arms of companies like Sony [SNE, News, Chart, Research] and Eastman Kodak [EK, News, Chart, Research], and it finds buyers for the start-ups' technology such as Tiscali [928860, News, Chart, Research] and Lycos. "We can say 'Hey Mr IBM, this is what we were talking about three months ago'," Mr Singh Rangar said. "If you want to put your software in front of Wanadoo [012415, News, Chart, Research] or SAP [716460, News, Chart, Research], we know the CEO, we know the CFO." Ariadne acts to find and close the deal, he said, and takes a share of the revenue, like a sales commission. "We call it the toll-booth model, they have to come through us. It also sources capital and finds experienced board members for the start-ups. Casino Ironically, having said the company didn't just gamble on volatile stock market flotations for its clients or on securing them capital and walking away, one of its start-ups is an online casino. Mr Singh Rangar said Ariadne had sealed deals for Casino Village On Net, from Tel Aviv, with portal Lycos.co.uk [TRLY, News, Chart, Research] and travel and entertainment e-tailer lastminute.com [LMC, News, Chart, Research]. The Israeli company's person-to-person BeTheDealer game, he said, could make it the eBay of the internet gambling world. The company would take a fee for each transaction between players, he said, rather than being "the house" and taking all the gamblers' loses. A player in the game could opt instead to become the dealer and walk away with the other players' money if they lost. Casino Village On Net, the brainchild of computer science graduates of Israel's Technion, have used peer-to-peer technology, like that used by music-swapping web sites including Napster. This connects players directly with each other and can allow them to access each others' computing resources or files. "It's the world's first peer-to-peer online casino to give away house odds," Mr Singh Rangar said. "Normally the odds are stacked in the house's favour at about 36-to-one. But with this, there's no house. "This will change the basis of the industry, like eBay did for auctions." One high-tech venture capital watcher, who preferred not to be named, said Ariadne's approach didn't reflect tougher times in terms of there being less capital around to invest in technology start-ups. "There's still a lot of capital around," she said, "a lot." But she said the screening process was tougher than ever and some were adopting "back to basics" business ideas. "It's more sensible, structured, more careful investment," she said. Another, Anne-Marie Roussel, vice president of emerging trends and technologies at market researcher Gartner, said Ariadne wasn't the first to take this approach. Some of the smaller venture capitalists were following a similar business model, she said, although sometimes it was unofficial. It was especially evident in Europe where the relationships between the start-ups and the VCs was often closer and more personal. But she added it was harder than ever for tech newbies to get funds and the shift towards generating live sales showed a change in attitude of the VCs. "It's a transition, you need to do more than just throw money at them. It's a completely new skill. "They were like little kids with instamatic cameras, they would just point and shoot," she said of VCs in the dotcom boom. "They didn't even focus the picture... they didn't know how to spell perspective. "Now they have to buy a camera that's more sophisticated and focus on the background." "They were like little kids with instamatic cameras, they would just point and shoot." Gartner on boom time VCs Research Mr Singh Rangar said Ariadne spent a lot of its time talking to its network of chief executives and chief technology officers in large companies to see what kind of technology they were looking for and how they would use it. It then matched these needs with start-ups' technology as it came along - and vice versa. It had developed a software programme to do this matching and had unexpectedly received requests from venture partners such as Royal Sun Alliance [RSA, News, Chart, Research] to licence the database technology for their own use. But it's not all about technology, Mr Singh Rangar added. He said Ariadne looked at the wider picture. It noted the population was aging, was becoming more mobile and more security-minded. So demographics would often play a part in deciding if a consumer technology product would take off. When it had a start-up with a product, it would survey its contacts in the industry to determine if and when and in what form that technology might be useful to them. "It's very hands on. We've simply got much more knowledge of what the market wants," Mr Singh Rangar concluded. Madeleine Acey is a reporter for FT Investor in London.  |
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