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October 24, 2010 11:17 pm
The venture investors who backed Betfair in its early days are hoping that British entrepreneurs will be inspired by its successful listing last week.
Balderton Capital and Index Ventures, two of London’s leading venture capital firms, both sold a small portion of their stakes in Betfair when the online gambling site made its trading debut on Friday. Shares in the company closed up 19 per cent, valuing it at £1.66bn, higher than had been expected.
They hope Betfair’s success will provide a boost to British start-ups.
“At a time when we need entrepreneurs to get going and employ people, I hope that this will be a real wake-up call that it can get done and that it will encourage others,” said Tim Bunting, partner at Balderton. “Here is a company that employs over 2,000 people, that started in the UK and stayed in the UK. We don’t have many of those companies in Europe.”
Neil Rimer, co-founder and partner at Index, said: “I think it’s a good reminder to investors in Europe and abroad that Europe does have some exceptional entrepreneurial talent.”
Betfair’s float comes 10 years after Balderton made its first investment. Mr Bunting said Betfair considered a float when he was its chairman in 2006-07, but instead took investment from Softbank, the Japanese telecoms group.
“In many respects, that was a substitute IPO which bought the company an extra three to four years, in which it has almost tripled in size and increased its robustness and predictability, both of which the public markets value highly,” said Mr Bunting. “Erratic private companies don’t make great public companies.” That level of stability is still hard to find in many privately held UK technology companies.
Mr Rimer said: “We have a few [companies] that are studying their moment to go public. But companies like this don’t grow on trees.”
Many promising UK technology start-ups are acquired by larger US companies before they become mature enough to float on the public markets. For example, Bebo, the social network and former Balderton investment, was bought at high multiples by AOL, and Last.fm, the music site backed by Index, was sold to CBS.
“When I came back to Europe to help start Index, the idea was to help create a Silicon Valley mindset in Europe,” said Mr Rimer.
As well as its achievements, Betfair’s “marketplace” business model is inspiring other start-ups to connect individuals online and take out the middleman. “Ebay had explained to people how the exchange paradigm would apply online, so we felt consumers could get their heads around exchanges for other things,” said Mr Rimer. “The internet offers a unique platform to address that.”
Index investments on that theme include Viagogo, a ticket-swapping site; Oanda, a currency exchange; and PeoplePerHour, which connects freelancers with small businesses. Balderton, meanwhile, hopes to replicate its success with Betfair by exploiting other neglected, unfashionable markets where technology can radically improve efficiency. Its portfolio includes Interresolve, which helps to handle accident insurance claims, and Wonga, which provides short-term loans.
“There is a slowly emerging European entrepreneurial spirit,” said Mr Bunting. “I hope that [Betfair] seriously reinforces that trend. To me that is the big hope – that when people see people being outstandingly successful, it makes more people try it.”
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