Will Olympics Score Gold?

Let the games begin!

The much anticipated London 2012 Summer Olympics get underway with the lighting of the Olympic flame on July 27.

Londoners, as well as the rest of the United Kingdom, are keeping their fingers crossed that the 17-day event will provide an economic boost as it has to other cities that have hosted past games, especially Beijing.

China enjoyed a burst of venture activity in the wake of the 2008 games.

Economists say the 2012 Olympics will generate £9.3 billion ($14.4 billion) in spending as 8.8 million ticket holders show up to see their favorite events. Another 2-plus million attend the Paralympic Games, athletic contests for the differently abled set for the two weeks after the regular games.

So, if there is a boost for the U.K. market, how deep does it go and how long will it last? Is there is positive fallout for venture capital after the flame is doused?

VCJ queried VCs and top executives at venture-backed companies in the United Kingdom and on the continent for their thoughts on the subject.

Some said the games would be distracting, taking the focus away from day-to-day business activity.

“There could be a small halo, but we aren’t expecting a lasting impact,” says Richard Baker, co-founder and director of the Reading, U.K.-based investment banking firm Beanstalk Management Ltd.

“If anything, we’re expecting the Olympics to slow all M&A activity down more than usual during July and August,” he adds.

“I am not sure that we’re seeing any connection between the Olympics and early stage startup activity,” says Charles Grimsdale, a partner at Eden Ventures in Bath. “It’s going to be pretty much business as usual.”

“The Olympics might have the effect of encouraging institutional investors around the world to invest in European venture capital again.”

Dörte Höppner

Secretary General

EVCA

But others were a bit more upbeat about the impact.

David Mott, investment director at venture firm Oxford Capital Partners in Oxford, says that the summer games would put the focus on the U.K., generating a positive image for years to come.

“The Silver Jubilee [celebration in early June of Queen Elizabeth’s 60 years on the throne] and Olympics are reinforcing Great Britain’s brand as a stable center of technological and cultural excellence, with a robust legal system that’s open for business,” Mott says. “It’s hard to put a value on this, but anything that links the ideas ‘Made in Britain’ and ‘Top Quality’ is good for exports.”

Philip Letts, CEO of the seed investment organization blur Group in London, which performs match-making services for businesses looking for creative talent, says one benefit of one-off global events such as the Queen’s Jubilee or the Olympics is that the world’s eyes are fixed on them.

“The challenge is how to latch onto those eyes,” he says. “The other benefit is a wider global awareness of things British and a halo for Brit cool that can help elevate U.K. startups and place them on a more similar global recognition footing to Silicon Valley ventures.”

“How long might the halo effect last,” asks Letts? “Get it right and it should be at least 12 months. Get it wrong and you might just miss out on the single biggest market opportunity of the decade.”

Still others had the halo effect in mind when assessing the impact of the Olympics.

Andy Sutton, CEO of the venture-backed Bag That Trading Co., says he “absolutely believes” there will be a halo effect on the U.K. market for a number of reasons.

“The focus of the world will be on the U.K. during the Olympics and we will put on a great show. Inevitably this will draw increased interest towards the U.K. as a place to do business,” Sutton says. “The country will be on a high with a feel good factor and that can only benefit the economy.”

What about the professional investors who’ll be watching the sporting events from Western Europe.

Jason Whitmire, general partner at Earlybird Venture Capital working out of Munich, says that he thought the impact would benefit those directly involved in building out the telecommunications links required for the 21stcentury games, and that would be the limit of the impact.

“The main beneficiaries thus far have been tech giants leading the massive systems integration exercise, such as British Telecom, Cisco Systems, Panasonic and Samsung,” he says. “However, the real legacy of the London Olympics will be the spillover from the Wi-Fi and fiber infrastructure left in the ground, as well as the potential repurposing of the cutting-edge athletes village into another startup accelerator hub in London.”

Dörte Höppner, secretary general of the European Private Equity and Venture Capital Association, or EVCA, says that the direct benefits of the Olympics are hard to quantify. But she says that the Olympics “are great because they are putting the spotlight on Europe again.”

“The focus of the world will be on the U.K. during the Olympics and we will put on a great show. Inevitably this will draw increased interest towards the U.K. as a place to do business … and that can only benefit the economy.”

Andy Sutton

CEO

Bag That Trading Co.

She adds: “The Olympics might have the effect of encouraging institutional investors around the world to invest in European venture capital again. The economy is very much about psychology, and the Olympics put a positive emphasis on Europe for those who question what’s going on here. They might look at us in a different way beyond the issues of the sovereign debt and the Spanish banking crisis.”

Back across the channel, Tom Allchorne, public relations manager for the British Private Equity & Venture Capital Association, or BVCA, says that London is already the home of venture capital in Europe, so the games won’t have much of an impact at least in the short-term.

“The post-Olympic legacy plans are exciting, though,” he says. “Specifically, there is Tech City, which is looking to create a tech hub in established cluster of startups in the East End of London and stretching it out to the Olympic Park in Stratford.”

He adds, “If that succeeds it really will establish London as the digital capital of Europe.”

Tom York is a San Diego-based contributor. He can be reached at tom.york@gmail.com.