DFJ Esprit

Creating value in European companies by expanding to the US

By | DFJ Esprit, Startup general interest, Venture Capital | No Comments

European companies that successfully launch in the US experience a step change in value and one of our investment strategies at DFJ Esprit is to be part of that process. We provide capital to finance the expansion and our networks and experience of how to do it right increase the chances of success.

These thoughts are in my mind right now because I’m sitting on a plane to New York for a three day trip during which my diary is entirely filled with meetings related to a number of our portfolio companies (barring one dinner with a venture partner at our sister fund DFJ Gotham). I think this is the first time I’ve been on a trip that is so dominated by our portfolio. It’s only a short trip, but I take that as a sign we have an increasing number of companies doing interesting things in the US.

We put a lot of work into being able to identify and help companies that can successfully launch into the US, including joining the DFJ Network back in 2007, and its pleasing to see we are executing well on this part of our investment strategy.

Our recent £2m investment in StrikeAd

By | Announcement, DFJ Esprit, StrikeAd | No Comments


News broke last week of our latest investment – a £2m Series A in mobile advertising startup StrikeAd. As the world’s leading mobile demand side platform (or DSP) StrikeAd enables agencies to plan, execute, and measure mobile advertising campaigns at scale and with high efficiency. We spoke with a number of agencies in the run up to this investment and it was amazing how many of them have them have significant budgets to deploy on mobile, but lack the tools to execute the campaigns.

The idea of mobile advertising isn’t new any more and as many of you will know there have already been a couple of significant exits from this market – including DFJ investment Admob which was acquired by Google for $750m in 2009. StrikeAd is different from Admob and the other large mobile advertising businesses because it is not an ad network. The ad network business model is to buy inventory from publishers and sell it onto advertisers at a markup, usually without disclosing the margin they are making. Over the last couple of years on the web publishers and advertisers have started to eschew the ad network business model, preferring to connect directly via ad exchanges. Ad exchanges allow for better targeting and realtime buying which results in more efficient spend for advertisers and higher rates for publishers. This trend is now coming to mobile, and DSPs, of which StrikeAd is the market leader in mobile, provide the sophisticated software and supply connections that advertisers need to target and execute their campaigns in realtime.

So from a market perspective StrikeAd stands to benefit both from the growth in mobile advertising and from the shift within the mobile advertising market from ad networks to exchanges. My favourite stat on the coming growth in mobile advertising came from Mary Meeker’s Internet Trends 2011 presentation last October – in 2010 8% of time spent on media was spent on mobile, but only 0.5% of ad spend was on mobile. Improved devices, larger screens, and above all the growth in m-commerce will drive convergence in those figures.

StrikeAd also has a great team with a long history in AdTech. I’ve known founder and CEO Alex Rahaman for seven years now and in that time he helped grow a UK ad network called Unanimis and sell it to Orange, and also there led the spin out and finance of a very large open source adserver and exchange called OpenX. Alex and his team have been a delight to deal with since he first came to tell me he was setting up a mobile DSP and all through the investment process. Addtionally, Thomas Falk, who could well be Europe’s most successful adtech entrepreneur, provided the angel funding and is an important part of the team.

Finally, a quick word on the product. StrikeAd manages a complicated technical infrastructure that processes huge volumes of data at very high speeds. The software processes over 20bn ad impressions per month, combines them with third party data sources for targeting purposes, bids on the impressions if appropriate and serves ads if the bids win. Total round-trip time from ad impression called to adserved has to be less than 100ms to maintain a high quality experience for the smartphone user. Campaigns are targeted on a wide range of parameters, including demographic data, location, time of day, and device type, and they are optimised for a wide variety of outcomes, including click through, app download, click to call (and even click to call where the call lasts longer than a specified time). All of this is presented to the advertiser (normally via their media buying agency) in an intuitive user interface. In short, this is heavy duty software, and not the sort of thing that can be knocked up by a couple of hackers overnight.

We’re excited by the prospects for this business. Revenue momentum is strong and hopefully StrikeAd will quickly become a substantial company.

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Heading home after our strategy offsite

By | DFJ Esprit | One Comment

I am sat in a hotel bar in Barcelona doing email for an hour before I catch a flight home from our annual strategy offsite and I’m feeling good about the two days we just spent here.  We’ve been doing these offsites for a few years now in one form or another and this time we got the recipe about right:

  • The level of preparation was good
  • The main session yesterday was well structured and focused on our number one priority – making 8-10 great investments over the next twelve months
  • We flexed the agenda in realtime to maintain a quality conversation, dropping one entire section (to be picked up back in London)
  • We listened too each other
  • We took decisions
  • We had some fun – last night especially, and visiting the Torres Winery today
  • We had the whole team here, including our non-investing staff

As a result I think we head home with a clearer idea of how we will achieve success in the next year, a few kinks ironed out of our processes, and us all feeling stronger as a team.

Good quality face to face time is invaluable.

DFJ Esprit offering £50k convertible note to winner of the Europas Tech Startup Grand Prix award

By | Announcement, DFJ Esprit | No Comments

As revealed by Mike Butcher on Techcrunch last week DFJ Esprit will be offering a £50,000 convertible loan note to the Grand Prix winner of The Europas Tech Startup Awards.

We are excited to be supporting Mike and the Europas and look forward to welcoming a new company into the portfolio.

The loan will convert into equity at the startup’s next funding round on the same terms as the new investor (i.e. no discount) and will not be interest bearing. The loan will be ‘plain vanilla’ in all other respects (i.e. no additional rights). The winner will have a week to decide whether to take the loan or not.

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Last night Riverbed acquired our portfolio company Zeus Technology for $140m

By | Announcement, DFJ Esprit, Exits | 2 Comments


Last night we announced the sale of Zeus Technology to Riverbed for $140m. This exit is the culmination of a lot of hard work by a lot of people over a long period of time. My involvement with the company dates back to 2004 when I led a recapitalisation of the business and there was eight or nine years of trading history before that.

I think we can identify a couple of characteristics of Zeus that contributed heavily to the success of the business in the period I was involved.

Firstly (and most importantly) the product has always been fantastic. We weren’t always selling a lot of it, but with very few exceptions the customers we had were very happy, mostly because the software worked really well. As former Chairman and CEO Paul Brennan used to say ‘it does what it says on the tin’. It was also very easy to install, so we had no headaches with complicated implementation projects or big professional services teams.

Secondly, we kept the business lean until the market was ready for us. Zeus competes with a number of much larger businesses and our unique selling point is that we sell software vs the competition’s hardware. That difference only became important to large numbers of customers when cloud computing took off.

There are many ways to build a successful business. This is the way that worked for Zeus.

It is common to joke that success has many fathers, but in the case of Zeus the list of people who deserve credit is indeed long. Key contributors since 2004 in the role of chairman or CEO were Paul Brennan, Paul di Leo, Michele Fitzpatrick and Jim Darragh. At different points over the last seven years each of them played a critical role in moving the company forward. I also want to thank the key members of the exec team who pushed the business forward to exit over the last couple of years: David Day (CTO), Charles Hobley (CFO), Kosten Metrewelli (Head of Marketing), and Pal Kosten (Head of Sales).

I hope I get the chance to work with all of you again.

Finally, I should mention the founders Adam Twiss and Damian Reeve who wrote the initial Zeus code when they were undergrads at Cambridge and ran the company during its early years. I didn’t get to work with Adam at all and only for a short while with Damian but their contribution was the most important of all (kind of obvious, but needs saying).

UPDATE: Thanks to everyone who has sent a note of congratulations.  It means a lot, even if I don’t reply in person.

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DFJ Esprit is five years old today

By | DFJ Esprit | No Comments

imageLast night we had a little party in the London Planetarium to celebrate our fifth birthday. In typical DFJ Esprit style the event was a little different to the norm with a super-hero theme, a 4D film (and I mean 4D), and drinking well into the night. As part of the show we had actors circulating in the room talking with guests, but believe it or not Captain America in the picture was not one of them, but rather our very own Simon Cook.

We came into existence five years ago today when we span our team and fund out of Cazenove and merged with Prelude Ventures which at that time was a listed investment trust and there were a number of things we *had* to get done after that to get ourselves on a stable footing.  Thinking back, it wasn’t always obvious that we would pull it off and life got a little hairy at a couple of points and like many young companies we had to take some hard decisions and change course a little.

Fortunately we have been on a good run for a while now though, and all that history is fast becoming a distant memory. We have made half a dozen investments since the second close on our new €100m fund last autumn and over the last twelve months or so we have exited companies with an aggregate enterprise value of $2bn (more detail here). Moreover, the new investments are all pretty exciting, e.g. Conversocial is bringing customer service out of the call centre and onto social media, Neul is building the chips and networks for the internet of things, and Horizon Discovery has a platform for developing personalised cancer treatments.

Next up is a short list of our major accomplishments over the last five years:

  • spinning the fund and team out of Cazenove
  • merging with Prelude
  • taking the Prelude Investment Trust private
  • joining the DFJ Network
  • acquiring a substantial part of 3i’s venture portfolio
  • raising our new fund

None of these were easy, and for each of them there were moments when you would have wanted long odds before betting on us to prevail. But we got there in the end, and without the complete set we would look very different and be in a weaker position than we are today. The fact that we did get there is due in no small part to vision, energy and deal making skills of Simon Cook who is the driving force behind DFJ Esprit (again, pictured to the right, although I should say his normal attire is business casual…) .

The other key to our success over the last five years has been the great companies we have been lucky enough to get involved with. It feels almost corny to ‘thank our entrepreneurs’ but we are nothing without them and this post would be incomplete if I didn’t.

Finally, on a personal level, the last five years have been a lot of fun. I love talking with smart people to identify market opportunities (including on this blog), I love the process of getting to know companies and entrepreneurs in the run up to an investment, I REALLY love it when they are successful afterwards, and last but not least I enjoy the feeling of contributing to the startup ecosystem we are all building here in Europe. I’m not pretending it is all strawberries and ice-cream, there is of course a tough side to business that isn’t always fun and I’ve seen quite a lot of that in the last couple of months. Overall though there is no doubt in my mind that the good stuff outweighs the bad, and by quite some margin.

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Welcome Conversocial to the DFJ Esprit portfolio

By | Announcement, Conversocial, DFJ Esprit | 6 Comments

News just broke on Techcrunch that DFJ Esprit has invested £1.5m in Conversocial, whose social media management software helps companies increase engagement and manage interactions with their customers on Twitter and Facebook.  The screen grab below from their home page shows the central dashboard which allows for efficient handling of social media including posting comments, replying to comments, delegation, and tagging, and on the right you get a glimpse of some of the analytics they provide.

imagePenetration of social media into enterprise processes and the transition from bought media to earned media have been investment themes of ours for some time now and were initially interested in Conversocial because it plays nicely to both these trends.

We have known and liked the founder and CEO Josh March for some time now and have met every six months or so for the last couple of years to check in.  Our interest picked up recently after he and I were on an entrepreneurs ski trip together in February and the way he was talking about his recent wins made me think he was close to nailing a good product-market fit.  We got together pretty quickly after that back in London and over the subsequent series of meetings we got increasingly excited about the team, the product and the market. 

I’ll say a little about each of team, product and market, but I’ll start with the team which is probably the most important of the three for a business at this stage.  We were keen to invest in Josh and Dan (Dan Lester is the other founder) because they are ambitious, super smart, know social media backwards, work hard, are great listeners and all round nice people to work with.  They have bootstrapped the company up to this point and have a great culture inside the business which values hard work, integrity, capital efficiency and only recruiting the very best (Dan is famous for his five hour interviews).  As you can imagine, we have spoken with a lot of people about Conversocial and without exception they have only had nice things to say about Josh and Dan.

The product has also had rave reviews.  It demos well, and when one of our interns used it himself for a couple of his ecommerce sites and gave it a strong thumbs up for ease of use, speed to process comments and the feature set generally, and these sentiments were echoed by the customers we talked with.  It takes a lot of work to make a complex system simple to use and the Conversocial team have done a great job in this regard.  The other features that customers like are the analytics which help them measure the effectiveness of their social media activity and benchmark it against competitors, and the integration with their other customer databases.  Both of these features are early in their evolution and I’m looking forward to seeing them develop so enterprises can embed social media (and Conversocial) more deeply into their existing processes.

Finally, the market is also exciting – at heart this investment is a bet that people will increasingly insist on engaging with companies on social media and that the companies will see the benefits they can get by agreeing to engage on Facebook and Twitter, and by doing it well.  We see that as a pretty safe bet. 

At the next level of detail, we have come to view software for managing social media as splitting into three segments with different customers and use cases.  The first and most developed is social media monitoring software, and you might have seen that Salesforce recently acquired the market leader in that space.  The second most developed is Facebook apps and other brand management tools where the leading companies have maybe $10-20m in revenues, and the third is using social media to promote engagement to achieve a blend of marketing and customer service objectives.  It is in this third emergent area that Conversocial plays and in our assessment has a leadership position.  I used the qualifier ‘in our assessment’ because social media software is still a young and immature market and most of the players still claim to be able to play in all the sub-sectors.  However, we think that the use cases and feature requirements are too different for a single company to dominate and that there will be valuable companies created in all three.

Investing is, of course, the easy bit.  The next phase of being there to help grow the company and for the founders and investors to actually make some money is both more challenging and more fun.

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DFJ Esprit portfolio has big share of Euro M&A market

By | DFJ Esprit, Exits | 10 Comments

The table below is taken from a presentation we made to the investors in our Fund I last week and shows something my partners and I are pretty proud of, namely that our portfolio companies figure prominently in league tables of recent European exits.  In fact, if you tally up the numbers you will see we were investors in companies representing 54% of the value of M&A in Europe over the last twelve months. 

And we have a couple more in the pipe :).

A couple of caveats are appropriate, the table below is limited to the areas in which we focus, and thus includes only IT and MedTech deals, and excludes biopharma deals.  It also excludes IPOs, of which there were a few good ones last year, including Betfair, Qliktech and Logmein.  Finally, it also excludes the Skype-Microsoft deal, which was announced after the slide was put together.

Additionally, there were other VCs in all bar one of the companies from which we exited, and funds like Index, Accel and Balderton have also profited from these deals.

Without being cheesy, I want to finish with the obvious point that all of this success is down to the hard work and brilliance of the entrepreneurs behind these businesses.  Hats off to them.


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New DFJ Esprit website live

By | Announcement, DFJ Esprit | 2 Comments

Our new website went live yesterday – please go and check it out and let us know what you think, positive and negative.  We will do an update in the not too distant future and we’d love to incorporate your feebback.

I hope you like it, mostly because I want us to have a good website, but in part because it has been a long haul getting here.  We started thinking about this project seriously at the tail end of last year and some of you might remember a post I wrote last December asking for help with our strapline.  This process has been a reminder to me that changing a company’s website might seem like an easy thing to do, but is complicated in practice, largely because of the need to involve so many people in the design at multiple different stages of the project and at different places of the website.  A website represents every part of a company which means that everybody (pretty much) has to be happy with it (pretty much), or at least with their part of it.

The other reminder I got from this process is that if you are undertaking a big project and you want to get it done quickly then you need to carve out some time from the organisation to make it happen.  We simply added the website project to our existing work loads which is the main reason it took us a little while.

A few ‘thank yous’ are in order.

First and foremost thanks go to Paula Darlison.  Paula is the lady behind the scenes here at DFJ Esprit who keeps us ticking in so many ways and the new website has been her project from design through to delivery.  She did a terrific job of building a great site and chivvying everyone here along to make their contributions in a timely fashion.

Secondly, a big thank you to Luke Razzell (project lead), David Gibbs (visual designer) and James Sui (developer) of Weaver Digital who took our initial designs and made them into something beautiful.  Have you ever seen one of those make over programmes where professionals help people change their look from head to toe and turn them into something almost unrecognisable?  That is what Luke and Nick did for us.  I can’t recommend them highly enough.

Thirdly – credit to all of you who helped with ideas for our strapline, but particularly to Jan Simmonds who came up with ‘fuelling global ambition’ which I think captures what we are about brilliantly.

Finally, (and this isn’t a thank you) if you are wondering what the caricature of me is all about, we thought it would be a bit of fun if all of us at DFJ Esprit had one done.  You can check out what my partners look like on their individual profile pages, which link off the team page.

Thank you and Happy Christmas

By | Announcement, DFJ Esprit | 6 Comments


2009 has turned out to be a good year for us at DFJ Esprit and I hope it has for you too.

After a difficult start I think the operating environment for most startups stabilised over the summer and turned mildly positive towards the end of the year.  Whilst life is obviously easier when the economy is growing fast I always think the most important thing for startups is that the economy isn’t going backwards.  If we are headed for an extended period of anaemic growth then so long as you have done a good job of picking a fast growing/fast changing sector or niche then you will be ok.  Arguably a period of low growth might even be good for startups as larger companies will invest less themselves and need to look to partner or acquire startups to get their top lines moving forward as fast as they would like them to.

At DFJ Esprit a lot of good things happened in the second half, most notably our acquisition of the 3i tech venture portfolio, the first close on our new primary fund, DFJ Esprit III, and our investment in Graze.  The last twelve months haven’t turned out to be a time when it felt right to exit any of our companies but the sixty odd companies in our portfolio are in decent shape and I fully expect that next year the market will allow some of our companies to realise what we regard as their true value.  There are one or two that could happen as early as next month.

I’ve also particularly enjoyed writing this blog and conversing with all of you during this past year.  I write at least one post every working day (usually exactly one) and in different periods I get into writing about different sorts of things.  A couple of months back I got into predicting how the future might look in various areas of social media and mobile during which time I felt that the process of writing what I thought and then getting your critique was invaluable in moving my thinking forward.  More recently I have been writing a series of venture capital related posts when your comments have helped me to better understand how entrepreneurs look on us at DFJ Esprit and our colleagues at other funds, something I hope will help me to better help you build some of the worlds best companies going forward.

Which brings me to the main point of this post, which is to say THANK YOU FOR READING AND COMMENTING.  Without your help this blog wouldn’t amount to a hill of beans.  An especially large thank you goes to 2009’s top commenters Henry Yates, Nicholas Lovell and David Semeria.

Happy Christmas to you all and looking forward to 2010.

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