LONDON – Recent explosive growth in Internet and e-commerce deals and the rapid pace of their evolution has prompted European venture capital firms to rethink their deal screening processes and investment approach, blurring the lines between competition and cooperation.
As the search to find Europe’s best Internet companies intensifies, six of the region’s leading venture firms have entered into partnership with E-Start’s Greenhouse program.
E-Start, founded by Jamie Mitchell and backed by SUN Asset Management, styles itself as a “provider of pan-European resources and capital for Internet entrepreneurs.” The firm works in conjunction with a network of legal, strategic and consulting service providers throughout Europe who are able to provide expert research and analysis to European e-start-ups.
E-Start in late 1998 joined forces with Amadeus Capital Partners of the United Kingdom, Atlas Venture and Gilde of the Netherlands; Germany’s Earlybird, Viventures of France, and Vest@ – a U.K.-based firm focusing on European Internet investments, which is itself backed by SUN Asset Management.
Simultaneously, E-Start unveiled an online tool, www.E-Start.com, a confidential way for entrepreneurs to use tools and information to develop their ideas and teams before submitting business plans E-Start’s venture partners.
What advantages do the six venture capitalists expect to accrue from their partnership with E-Start, in view of the fact that they are all competing in the same sector?
E-Start’s Jamie Mitchell explains that Greenhouse will act as a “filter,” performing some 80% of the due diligence typically undertaken by venture firms, before passing on suitable investment propositions to the venture funds. “We’ve put together a complementary group, not a club so that competition between the venture firms for deals will result in a better service to the entrepreneurs,” Mitchell said. In cases where one of E-Start’s venture partners rises to the bait of a business plan, E-Start gets to invest a maximum of 25% of the venture funding from its own capital on a pari passu basis – potentially a very valuable opportunity.
Amadeus managing director and co-founder Anne Glover said the firm believes that E-Start and its Greenhouse program will “help ensure that quality deals rise to the top of the current flood of Internet activity.” Mitchell, meanwhile, reports that two of the 40 online business plans received during Greenhouse’s first month of operation have been passed though to the program’s venture capital partners.
E-Start’s ultimate objective – aside from the potentially handsome returns from getting in at the ground floor in start-ups alongside leading venture capital investors – is to provide a network of support and resources that will enable European Internet entrepreneurs to compete on a level playing field with their United States counterparts.