Philippe Botteri, a judge in the start-up competition at Le Web, an annual Paris-based Internet conference that attracts a global audience, has worked in the technology industry for the past 15 years, most of it based in Silicon Valley. Since joining Accel Partners in London in 2011 Botteri’s focus has primarily been on the Internet, cloud computing and software-as-a-service (SaaS). He led Accel’s investment in Paris-based BlaBlaCar, a pan-European pioneer in ride-sharing, and in Docusign, a global SaaS company specializing in electronic signatures.
He also co-led Accel’s investment in HouseTrip, a next-generation holiday rental booking website. Prior to joining Accel, Botteri worked in the Menlo Park office of Bessemer Venture Partners, a global venture firm, where he led or supported investments in early- and late-stage companies in the U.S. and Europe. Before joining Bessemer, Botteri spent eight years with the high-tech practice of McKinsey & Company in Silicon Valley and Europe, specializing in the software and Internet sectors. He recently spoke to Informilo’s Jennifer L. Schenker about the European tech landscape.
Q: How has the European landscape for start-ups evolved since Accel Partners first started investing?
A: The landscape in Europe has really changed and that makes the geography really exciting. Our first fund, raised in 2001, was focused mostly on start-ups in the UK and in Israel. That was where most of the opportunities were at the time. If you look at our third and current fund we are pretty much investing all over Europe – the UK and Israel remain important for us but we are also very active in France, in Germany, in Spain, in every country of the Nordics, in Eastern Europe and Russia. That is the big shift in the last few years. There is not a place in Europe equivalent to Silicon Valley. Europe is made of a dozen hubs – including London, Paris, Tel Aviv, Stockholm, Berlin and Moscow for example — and when you put all these hubs together you have a very good ecosystem and a lot of exciting investment opportunities.
Q: How does Paris fit into the picture? London and Berlin seem to be getting all the buzz.
A: From our perspective Paris is one of these hubs. It is a very active geography for us. We have invested around $60 million in start-ups in France in the past three years including Showroomprive.com, BlaBlaCar and Shopmium. France is really innovative in creating new business models — the country’s flash sales model has been copied around the world, Criteo invented retargeting, BlaBlaCar, a ride-sharing service, was the first to develop a business model around people booking rides in the same way they book a train ticket. Similar companies in the U.S. have emerged following BlaBlaCar but the Paris company was the first to develop the activity at scale (2.6 million members now across Europe which is more than 10 times their closest U.S. competitors) and invent a simple and safe transactional model online. They have now expanded from France into six other European countries.
Q: France is getting a bad rap right now in the press. Is this scaring off investors?
A: I don’t think France has a particularly bad reputation for investors. In the tech scene it has some pretty interesting successes and U.S. funds are looking at the market more actively. In addition to Accel Partners’ investments Summit Partners invested in vente-privee.com, Bessemer in Criteo and Battery Ventures in Neolane so I think people are starting to realize that France is an attractive geography to invest in.
Of course the recent change in the law for start-ups is not really helping. The basic concept of the new government was to tax capital gains as salary. They tried to apply this across the board and did not realize the impact it would have on the tech ecosystem that is starting to emerge. This generated a lot of back and forth with the tech community (“The Pigeons” movement). The government realized it went too far and tried to mitigate their initial proposal by adding a set of restrictions that would apply. Net net they are adding a lot of complexity and will create misalignment both at the founder and shareholder level. For example, two founders of the same company, one owning 15% and the other 9%, will end up paying very different tax rates. The new law will likely create conflicting situations. Rather than making things simple and promoting the ecosystem this tax scheme will make things more complex and will make start-ups spend time and money with tax advisors to understand the law and restrictions instead of focusing on building innovative businesses.
Q; We’ve talked a lot about France. What do you see as Europe’s tech strengths?
A: Europe has proven to be a real innovator in several areas. We have talked about innovation in online advertising technologies and Internet with companies like Criteo, Showroomprive and BlaBlaCar but the list is much longer (Spotify, Wonga, Housetrip, Badoo…). Israel, the UK, Eastern Europe, and the Nordics have proven to be very innovative software hubs, with companies like Qliktech, Alfresco, Parallels, or Wix. One other area that we particularly like and where Europe has been historically very strong is gaming. We invested in Playfish, Gameforge, Rovio, Mindcandy and Supercell in particular. Supercell is a phenomenon — the company has the fastest revenue ramp up of any company that Accel has ever invested in worldwide. Supercell is generating more than half a million dollars of revenue per day and they reached that level in two or three months after launch of two games. One of the reasons is that this company has been successful is its tablet-first strategy. The other is that the team has real gaming DNA and is very creative. Recently Supercell’s Clash of Clans and Hay Day and Rovio’s Star Wars were the top three grossing apps on iOS. This is quite an achievement for these companies.
Q: There is a persistent belief that VC returns in Europe are inferior to those in the U.S. Is it true?
A: This is not what we have observed. The way that the venture industry everywhere in the world works is that the returns are usually concentrated in the top quartile firms, while the rest of the pack are not as successful. Institutional investors invest in U.S., Asian and European funds and all the funds are benchmarked at a global level.
If you look at Accel historically our fund-raising process has been short and successful. For example, we started raising our last fund at the end of 2008, the worst time ever to raise money, and closed the fund in a matter of weeks. There is a strong appetite from institutional investors for European funds that are performing well. The fact that Accel is a global platform is a key differentiator for us. One other element that Institutional investors are looking for in a geography is its ability to generate large outcome, typically north of $500 million, and now Europe has proven its ability to generate those outcomes. Here are just a few examples of companies that have exited above this value or have the potential for it: in France you have vente-privee.com, Iliad (Free.fr), showroomprive.com, and Criteo; in the UK there is Wonga, Spotify, Playfish, Badoo, Mindcandy and Alfresco; Sweden produced Qliktech; and in Eastern Europe there is Skype, Yandex, Avito, Mail.ru, KupiVIP and Ozon. So there is enough evidence for VCs to be confident and for limited partners to be optimistic about producing superior returns in Europe.