Incubators were being launched everywhere across Europe. Funds were raised for amounts never seen before.  Companies set up corporate venture arms. Everybody wanted to be an entrepreneur in the new economy. Young graduates with no savings nor any experience. Or frustrated executives with no experience of life in the wild. Rounds of financing were scheduled every 6 months with exponential valuations and paper achievements.

And the US funds (see about Benchmark, Accel, and Carlyle) finally started to appear in Europe to do some catch up. They needed relief from a competitive US market. And they could see their affiliates needing to go global. Most operated in the traditional fashion when moving from US to Europe , i.e. with stop over in the UK - probably not the best spot. Softbank creates new funds dedicated to Europe and UK .They will become inactive a year later.  Others even want to go from a regional presence to a worldwide powerhouse in one go.

Where did that take us ? To the present showdown ! There was a time when a VC prouded himself on not funding anybody more than an hour's drive from his office. As indicated by a June 2000 article in the Economist, venture capital is not a scalable industry. Its present returns were earned when seasoned professionals were able to select the right projects.

What we have seen at the end of  1999 and the beginning of 2000 is inexperienced investors finance inexperienced entrepreneurs. Experienced investors in a given cultural environment expand to new grounds which culture and language they do not understand. People used to buyouts invest in start-ups. This called for readjustment. It is currently taking place as shown by the latest industry information summarized in the News page. Many a fund manager will get burned. But, I believe, not as much as this new breed of business angels which tried to jump on the bandwagon to get rich quick and which will neither have a portfolio effect nor the time span required to lick its wounds.

Related links

On the flurry of US funds going to Europe in 2000

A number of articles have been withdrawn from the site where they were initially published.

Business 2.0 on Europe's New Capital (February 2000)
Includes a most to the point section "Howdy, Pardner" on the usefulness of local experienced investors to iron out cultural idiosyncrasies. Access now required.

The June 2000 issue of Wired presents quite accurate information on Paris (France) and the incubators and VC craze here at the time.

Current information

A June 2001 survey of European Private Equity by the Financial Times, and a November 2001 survey of the buy-out market. Badly enough, you now need to subscribe to access the contents.

The latest Moneytree surveys of venture capital around the world are available for Europe, Israel and the USA  as Acrobat downloads. Also available, the Moneytree reports on technology investments.