- Thursday, 12 November 2009
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Don't buy the house, buy the neighbourhood - Russian proverb
Never trust a banker, says adventurous capitalist
EUROPE MAY have the richest poor people in the world, but it doesn’t create billion dollar technology start ups.
That was one of the bleak messages that came out of the Going Platinum venture capital conference at London’s Institute of Directors, organised by Ariadne Capital.
This is one of those scary events where frighteningly intelligent visionaries, like Ariadne CEO Julie Meyer, give you glimpse into a future that could give you one hell of a ride, but you just know it’ll thunder into the distance before you’ve even got your trousers on.
Still, it’s worth hearing anecdotes from those who’ve made millions out of IT. Especially when they’re being honest.
David Rowe, founder of Easynet, admitted that he made millions by luck as much as judgement. Nobody really knew whatt they were doing in the early days.
BT wrote him a letter, in 1994, promising not to enter the Internet space. Virgin boss Richard Branson said there was no future in the Internet, as he couldn’t find anything on it. Rather like today’s mobile content industry, nobody really knows anything.
“If you’re in technology, and you find the bankers agreeing with you, you know you’ve got it wrong,” Rowan told his audience. “Their job is to ride on a wave of sentiment.”
To illustrate that point, he confesssed that at one stage, his ISP EasyNet was trading at 800 times its revenue. But because EasyNet had invested in infrastructure (it had the most advanced local loop offering outside BT) that made them a good acquisition target. So eventually, Rupert Murdoch’s BskyB bought his company for £211 million in October 2005.
So who made a fortune from the Internet? “People who got lucky and people who cleaned up by snapping up the assets of those who didn’t,” says Rowe.
His final advice for IT entrepreneurs. “Be confident when you speak to bankers, as you’re better than them.” µ
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That may well be, but they have the money you need. If you can't convince them, they'll keep their money and you're up the creek without a paddle.
So it may pay to not be too confident.

Ah, the wonders of self-motivation. Sounds exactly like the kind of thing those dot-com failures must have been thinking.
Except that, to be true, you have to be part of the real elite, not a Leander, Malmsten or Hedelin. You have to know how to not get blinded by form over function, how to define your target market and its desires, and carefully plan how to fulfill said desires.
There are people that can do it, but there are a lot of people who will just latch on to the motivational track without any reality check.
In response to Pascal Monett: If we need always need the bankers, and I feel you implied the "always," why is Linux such a fantastic product.

Off-topic: The best way to make money is not to concern yourself too much with it. My goal is to increase the sum total of happiness in the world. If I'm ever living large, and have a lot of money to throw around, it's time to look for things to throw it at that aren't necessarily profitable for me, water wells for Africans, microloans, chancy green technology research, etc. If I'm not living large, than I do little things. I have a friend who doesn't have a lot of money, so when we go out, the rule is,"I treat, but you behave like you're using your own money when you look at the menu."