Dotcom babies
Article Date: May 12 2006
The winners’ story
Among all the tales of woe, there were some for whom the dotcom shenanigans worked out well. George Coelho is one of the most respected luminaries in UK investment circles and someone who knows a thing or two about dotcom pioneers. Almost seven years ago, he helped lead the expansion into Europe of US venture capitalist Benchmark Capital, an investor in a range of internet ventures, including an embryonic online flea market you might have heard of: eBay. His team managed to make hay while others were caught in the downpour.
Coelho says, ‘To be honest, dotcom has worked for us. It’s the hallmark of our firm. When it all blew up, a lot of people were running away from the market, so we didn’t face much competition.’
Benchmark backed Betfair and merged it with a competitor in 2001 to create ‘the world's largest exchange betting company’, which now processes more than $3 billion annually.
Coelho also cites examples of the trend for companies to ‘soldier on’ during the bust period, lingerie e-tailer Figleaves.com being one of them. It was set up in 1998 and grown using the founder Daniel Nabarro’s own money and no venture capital until Benchmark met them last year and bought a 40 per cent stake.
Avoiding future follies
As for eBay, Coelho says, ‘It succeeded for a number of reasons, but primarily because it had good founding entrepreneurs and it was profitable even before we invested. They focused on getting it right in each area they tackled before they moved on to the next, concentrating on getting the technology functioning properly. Then they brought in a great CEO, Meg Whitman, and they had the luck of being in America when it was already a very wired country.’
This demonstrates one of the central tenets of Coelho’s investment theory and practice: it’s all about people. ‘When investing, we look for someone who can be a truly great entrepreneur, have pride in fostering the business and who wants to build something big, not get out after a couple of years. We want a partner who can captivate us with their ideas; our philosophy is not, “oh, it’s worth a punt just in case”.’
So, what’s the single most important piece of advice Coelho can offer anyone operating an internet company in Europe now?
‘Look at the US,’ he replies. ‘What is the competition over there doing? They’ve had much more practice, so look at what they do well and why. What’s their secret? Every business has a secret ingredient, and learning from the highs and lows of others is a tried-and-tested recipe for your own success.’
Remember these short-lived sites?
Peoplenews.com
– upmarket gossip site backed by around £5 million worth of investmentEbop
– cult lifestyle magazine site backed by eVestment and, controversially, by former directors of AIM investment vehicle IEQWowgo.com
– online community for teenage girls, backed by Unilever and DurlacherReady2
– a provider of shopping advice for ‘women with attitude’, fronted by the then-Daily Telegraph columnists Trinny Woodall and Susannah Constantine, now famous for their What Not To Wear TV show.
