Work Never Stops for Captain America of Europe

“We love what we do. It’s been great to build our own VC business,” says Simon Cook while on holiday in Antigua.

The founder and CEO of DFJ Esprit is taking time out in the wake of the firm’s fifth birthday celebrations.

And quite the party it was. Cook donned a Captain America costume for the firm’s anniversary celebration, which was staged at the London’s Stardome and which had a super heroes theme.

Tim Draper [co-founder of Draper Fisher Jurvetson] has been on the cover of VCJ in a Captain America outfit, so I was the Tim Draper of Europe for the night,” quips Cook.

Cook has grown London-based tech investor DFJ Esprit, exclusive European partner of DFJ, to boast about having some notable exits this year, with BSkyB buying WiFi network The Cloud and Amazon picking up DVD rental business Lovefilm.

London-based investor DFJ Esprit had acquired The Cloud as part of a 3i venture portfolio it bought in 2009, and it owned a stake in Lovefilm since a 2004 investment in predecessor Video Island. The firm has also had exits with semiconductor company Icera; Healthcare Brands International; and ApaTech, a developer of bone graft substitutes. In addition, DFJ Esprit has six exits of between $20 million and $100 million, which includes The Cloud, Phyworks, Lagan and TLC.

The exits no doubt explain why Cook was recently recognized at the M&A Awards 2011, at which he was crowned Dealmaker of the Year.

“The M&A market in the U.S. has really kicked off and that’s now spilling over into Europe,” Cook says. “We acquired a number of funds which were ready for exit and we’ve been taking advantage of that.”

Still, despite the busy times at the firm, Cook found time to recently sneak away to the West Indies.

“Antigua is one of our favorite holiday places, but global broadband and mobile means I’m never out of the office,” says Cook, who adds that he hopes to “sneak in some fishing” while on his trip. “Deep sea fishing teaches the patience you need in venture. It can be a long time between extreme bouts of excitement waiting to land a big exit and you need to keep reeling them in sometimes.”

The English-born Cook, who grew up in Vancouver, Canada, founded DFJ Esprit by leading a management buyout of Cazenove Private Equity and merging it with Prelude Ventures, a Cambridge, U.K.-based publicly listed vehicle. The merged firm had less than $500 million in funds available, but Cook and his partners self-funded initial investments with support from LPs Coller Capital and HarbourVest Partners.

Prelude was taken private in 2008, and a year later DFJ Esprit acquired the remaining part of 3i’s European ventures business.

Cook, who lives in Cambridge with his wife Sarah and their 15-year-old daughter Yasmin, is now investing in new ventures, too. Last year, DFJ Esprit closed a new $150 million fund, which has made seven investments to date. Its latest deal is in Cambridge-based Nuel in a $12.8 million round, led by DFJ Esprit and including IQ Capital and Cambridge Angels. The deal has been hailed by some as one of the most significant venture investments in new wireless technology in Europe for the past three years.

“Nuel has an exciting vision. Its chips are as cheap as Bluetooth technology. Everything from washing machines to cars could have a $1 chip and talk directly to the internet,” Cook says.

His work at DFJ Esprit is a far cry from the days when he was developing computer games from his university bedroom.

VCJ contributor Jennifer Hill recently talked to Cook about his experiences and plans for the firm.

Q: How did you get started creating computer games while in school?

A:

My dad worked in construction and always aspired to start his own business, but never did. However, he instilled entrepreneurial DNA in me. I always had a paper round or some other means to make money. University didn’t take up that much time, so I started writing computer games and getting them published.

Q: Why didn’t you continue the business after school?

A:

It was the early ’90s and I had no idea about venture capital or starting a company for equity; I ran it for cash. I wrote a game, got paid and collected royalties. The entrepreneurial community that exists at universities today didn’t exist 20 years ago.

At the same time, the computer games industry grew up. It became much more expensive to develop games. It went from being a small industry, where you could run a company from your bedroom, to a £1 million-type operation.

Besides, I wanted to learn more about business, so I went to the City and became a management consultant.

Q: From there, how did you follow a path into venture capital?

A:

Initially, I was a general consultant for KPMG. Then in ’95, the firm set up a digital media division to focus on digital media and the Internet. I got to work with a bunch of exciting new technology companies.

One of my clients was 3i, which used to hire KPMG to write due diligence reports. So for two years I did due diligence for VC firms in Europe.

I later joined 3i as an investment executive, then Elderstreet Ventures as a partner. It was around that time that Cazenove raised the largest first-time venture fund in Europe. It was building its ventures team, and I joined as a partner.

Q: How did you come to start DFJ Esprit?

A:

At Cazenove we recruited some 3i partners, and in 2006 we did an MBO and spun out the ventures business to found Esprit.

We soon noticed that a number of U.S. ventures firms were recruiting in Europe, which suggested they thought Europe would be the next India or China. We wanted to partner with a U.S. firm, and we joined the DFJ network as exclusive European partner.

With the DFJ network, the sum of its parts is much bigger than the individual ones. It’s about being global and having global connections. We can help our entrepreneurs get connections across the U.S., Japan and China.

We want to be the most attractive VC firm to entrepreneurs; that way, hopefully, people bring the best deals to us.

Q: What have you learned along the way?

A: The number one lesson in business is to work with people you can trust. Out of our eight partners, five were together before at 3i.

Q: You’ve enjoyed a good deal of exits recently. What sort of returns have you achieved?

A:

The majority of our funds are on track to achieve targets towards three times their money.

Q: What are your fundraising plans?

A:

We want to invest our latest fund in another 10 to 20 companies in the next year or two. Then, we’ll raise a new fund again, and we might do more acquisitions.

Q: What big issues are of concern now in the venture industry?

A:

The U.K. Budget was important for entrepreneurs and angel investors. The increased tax breaks through the Enterprise Investment Scheme were very welcome. But not every angel wants to invest in an individual company and would prefer to invest in funds.

We’d like to see better tax breaks for fund investments. There’s also a big gap in the U.K. and Europe in larger rounds, though it’s getting better. Over the last five years, 220 U.K. companies have raised venture rounds of up to $3 million. Similarly, in Silicon Valley, that number is about 250.

However, only 60 companies in the U.K. have raised an average of $10 million, against 300 in Silicon Valley. So we start lots of companies in the U.K., but don’t do enough late stage funding.

Q: What’s DFJ Esprit doing to help?

A:

We’re involved with the EVCA [European Private Equity and Venture Capital Association] and the BVCA [British Venture Capital Association] and want to work with government to help the industry.

Our new fund is structured to invest where the gap in the market is. A third of the $150 million is for seed and Series A funding, and two-thirds will be Series B.

We want to put real money behind companies.

Q: Are there any sectors you particularly like?

A:

There’s huge excitement in social technology and chip technology, but medical technology over the next five years will also be huge.

We led a £6 million ($9.58 million) round in Horizon Discovery, a personalized medicine firm, which will allow pharmaceutical companies to test drugs against genetic variation.

Q: What inspires you to get up in the morning?

A

: I’m driven by new ideas, new markets, new products.

I get more excited about seeing a great new product than spending hours looking at numbers on a spreadsheet. One of my heroes is [retail tycoon] Philip Green: he’s gone from having a single shop to owning most of the [British] high street. He’s done that because he’s always put everything into his next venture.

Q: Any advice for entrepreneurs starting out?

A:

You have to believe in yourself. And when times are tough, you have to know that there’s always a solution and a source of capital. Try your customers and suppliers.

VC is only one way to raise capital and most of the time isn’t the right one. You have to hustle. When the opportunity to acquire the 3i portfolio came up, we were prepared and hustled very hard to make sure we won that deal against really tough competition.

When everything seems to be against you, there’s always a way.

Simon Cook at a Glance

Title:

Founder and CEO, DFJ Esprit

Birthplace: Birmingham, England

Age: 42

Education: Computer science degree, University of Manchester Institute of Science and Technology

Work history: Self-employed computer games designer (1989-1991); management consultant at KPMG (1991-1997); investment executive at 3i (1997-2000); partner at Elderstreet Ventures (2000-2001); investment director and partner at Cazenove (2001-2006); founder and CEO of DFJ Esprit (2006-present).

Recent investments: Wireless data business Nuel (the only company Cook currently has a board seat on, due to recent exits); healthy eating company Graze; personalized drugs company Horizon Discovery.

Last book read: “The 4-hour Body” by Tim Ferriss, which Cook calls “a Bible for everyone who’s turned 40.”

Did you know? Cook has “hacked together” an old player piano with a karaoke system, so “people sit around at home singing karaoke.”