Re: UKNM: Wimps?

[Peter Beech]

Richard Houston wrote:


>Razorfish swallows up (sorry "merges with") Sunbather.


More likely Mike Bennett wanted to de-stress and stop worrying about

running his own outfit, take some cash for his hard work, and become part

of an international networked company that provides both safety/reassurance

and opportunity - doesn't seem to be a bad thing to me.


>Do we suffer from a fundamental lack of ambition this side of the water?


Certainly not, as many have already said it's fundamentally harder to raise

the financing over here. Reasons include:


* Cost of capital - driven by higher interest rates and therefore higher

expectations on ROI


* Lack of VC specialists for start-up / first round funding - those that

exist tend to focus on software and e-commerce, precisely because they are

high risk, high return opportunities. Arts Alliance and Cubic Egg are steps

in the right direction, but they're tiny cf. USA.


* Government initiatives like the Venture Capital tax breaks for rich

individuals (£100k limit per person) are unrealistic. The only route to

getting real utilisation (i.e. to fund the typical start-up project that

needs £250k-£500k) is to form a VC Trust by aggregating individual

investors - trouble is it's a bureaucratic / legalisatitive minefield to

set one up. So potential fund managers don't bother they go straight for

the City Big Boys and look for larger projects to fund (there's as much

effort and cost involved in doing the deal on a start-up for £500k as there

is in doing it for someone wanting £5m)


* VCs can be interested in first round but, - typically they'll ask you to

take away your £500k plan that you've slaved away over for months refining

and tweeking and ask you to come back with one that needs £5m (I speak from

experience!)


BTW - Evidence for some of the above can be seen in US VCs attitudes - see


http://www.redherring.com/insider/1998/1026/risk.html


* There are far greater limits on exit strategies in the UK - i.e. AIM

isn't NASDAQ, ask anyone who deals with this stuff day-to-day, they'll

laugh at AIM as an illiquid market. If you do manage to get your cash and

see it though to a listing - go to NASDAQ. If you don't list, you make a

private sale.



If you don't believe me ask Dr. Murdoch at Amazon.co.uk about finding a

million quid to fund IBS.


--

Peter Beech

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