Sponsored Article: Transatlantic Investment Strategies

It is a truism today that new technologies are making the world a smaller place. Growth of the Internet, new developments in telecommunications, and the increased availability and lower cost of international travel mean that organisations which until now have been able to operate successfully in a single country are now having to think globally.

Nowhere is the need to think globally greater than in the technology industry. Trends are moving in step across the globe, and the time-lag which could be observed across

different geographies as recently as three years ago is today virtually non existent.

While trends in technology have hitherto generally travelled eastward and Europe has learned from the US, now in many instances Europe is itself the clear leader – mobile telephony and cable TV, secure payment technologies, and any software area requiring complex multi-language, multi-currency or multi-tax support being good examples.

The emergence of EASDAQ, Techmark and other new Continental exchanges for technology stocks is a clear signal that Europe is very rapidly becoming as technologically savvy as the US.

From a US perspective, therefore, European technology markets which previously were perceived to be of little interest to the major funds, are now assuming a greater importance. An increasing number of US technology funds and investors are now moving into Europe, attracted by the size and scope of the market place as a whole, and by a growing number of technology related investment opportunities.

The early global lead that US companies and investors have established in the Internet and e-commerce sectors is clearly recognised in Europe. However, in many ways, US venture capitalists have a number of hurdles to overcome as they look to invest in Europe. While the UK has historically enjoyed a similar regulatory regime and investing climate to the US as well as a shared language, the fiscal, legal and cultural barriers to entry into continental Europe are higher.

Despite political aspirations to the contrary, Europe is not yet a single market. Every country has its own idiosyncrasies which investors cannot afford to ignore and which are generally known best by local firms. Additionally, while many US investors have looked towards Europe in the hope of finding a less competitive and lower priced investment environment, in many cases European companies are realising higher valuations than their US counterparts. Scarcity value and the “local hero effect” often mean that there may only be a handful of companies available for investment.

So how does a major US venture capitalist like BancBoston Capital develop its transatlantic strategy?

BBC has had a bridgehead in London for over 20 years and is well established as an MBO specialist across Europe. In Europe the firm’s watchwords have been patience, sensitivity and cooperation. While BBC plans to be one of the most active technology investors in Europe in the new millenium, it will adopt a collaborative approach, choosing to work with, rather than compete with, established local investing institutions.

BBC’s local market knowledge has been achieved through building a comprehensive network of partner firms throughout Europe. Well established local venture capitalists such as Innovacom in France, Polytechnos in Germany, Genesis Partners in Israel, and Delta Partners in Ireland have a comprehensive knowledge of their home markets, and are ideally positioned to assess local management teams and the viability of new business concepts in their domestic environments. But while local presence is key in providing market knowledge, cultural awareness and a degree of comfort to the local company, ambitious companies recognise the value of the US perspective.

The prospect of a shrinking world means that many European companies, like their competitors elsewhere, are now actively thinking globally. No one can cater better for such global aspirations than an organisation like BancBoston Capital. Its parent, Fleet Boston Financial, is the US’ eighth largest banking group, with a worldwide commercial banking franchise.

BBC itself has technology investment experience on both coasts in the US, its own network of offices around the world, and a close

working relationship with its sister company, technology investment bank Robertson Stephens.

By providing access to its global network of portfolio companies, network partners, investment banking and commercial banking resources, BBC brings an unparalleled perspective to its portfolio companies and local venture partners. Each function of the portfolio company’s business can tap into this network, be it for sales leads, recruitment ideas, financial expertise, or technology know-how.

BBC also brings with it its brand name – that of a successful global venture capital investor, which lends further weight to its portfolio companies’ future capital raising activities.

Europe, and specifically European technology, is currently BBC’s principal focus, with an expected $75 million to be invested during 2000. To this end, the partnership strategy has given BBC comprehensive coverage and excellent deal flow throughout Europe. Using this model, BBC has invested in companies in seven different continental countries during the past year. These include Allot Communications (Israel), ArztPartner (Germany), Avanza (Sweden), Build-Online (UK), Meta4 (Spain), IOBox (Finland), and Massana (Ireland).

BBC has an understanding of growth company dynamics derived from operating in some of the world’s most dynamic markets. With local knowledge and a global network, BancBoston Capital is a big investor in a small world.