Our Investment Philosophy and Approach
The market for innovation in Europe is weak, under attack and declining:
1. European Venture Capital as an asset class has performed badly.
2. Leading entrepreneurs try to avoid funding in Europe or go to Silicon Valley to find financial partners who will think as big as they do.
3. The acquirers and stock exchanges are mostly in the US.
4. GDP growth in Europe compared to the US is meagre.
5. The US technology platform companies (Apple, Facebook, Amazon, Google, Uber, and AirBnB) are entering every industry and disrupting them while taking them over.
6. A model of success is not commonly understood so a general lack of belief that Europe can win is pervasive.
Almost everyone from European Corporate CEO’s to European venture capitalists believes that America always win, that the answer is in Palo Alto, and that Europe’s role is to be in service to the US, selling its best companies to them.
Ariadne Capital is virtually alone in having a belief that Europe can win big, that there is a system-level design to the solution. The EU through funding programmes (Horizon 2020) to the European Investment Fund (who back first time funds in Europe) subsidises a market failure which further sinks Europe into a second class American citizen status.
What is needed is what Ariadne Capital has:
- A decade-long investment and operational plan and intent to build ecosystems in Europe.
- A solution to the problem of Creative Destruction which is not reliant on huge amounts of capital, bravado marketing and buying low and selling high.
- A methodology that European enterprises can use to reinvent their industries.
- A European model of success in the digital age which empowers individuals with a new asset class: their data, turning every EU citizen and resident into a data entrepreneur.
Ariadne’s founder, Julie Meyer, is the person who can lead the business which will seize this market opportunity. She has a unique set of business credentials, experience and company-building track-record:
- INSEAD educated and sits on their Board of Directors and Finance & Administration Committee; INSEAD named Julie one of their top 50 alumni in 2011.
- Founder of First Tuesday which many believe ignited the internet generation in 1998, building a first generation cohesive internet market across Europe.
- World Economic Forum Global Leader for Tomorrow 2001.
- She pioneered the ‘Entrepreneurs Backing Entrepreneurs’ model for the financing of entrepreneurship in Europe in 2000; Ariadne Capital was the first investment firm and institution to have leading entrepreneurs as shareholders, thereby creating a virtuous circle of successful entrepreneurs backing the next generation of emerging entrepreneurs.
- She has led £350 m of transactions across Europe into technology start-ups since 2000. She has backed 7 explosive growth companies since 2000 including Skype, Zopa, Espotting, Monitise, SpinVox, BeatThatQuote and SoundOut.
- She has keynoted and spoken to the Board rooms of leading European firms on strategy, innovation, digital transformation and entrepreneurship. She wrote Welcome to EntrepreneurCountry which was published by Little Brown in 2012, and is the inventor of Ecosystem Economics™.
- With German grandparents, an MBE from the Queen of England, 7 years residency in France, and 18 years in the UK, she is a European in spirit.
She is joined by a strong team of advisors, executives and active shareholders who have helped to influence Ariadne’s strategy, most notably:
- Amit Pau – since 2012, Managing Director, Ariadne Capital and Partner, Ariadne’s Fund; ex Group MD of Vodafone, main Board Director Vodafone Spain, AT&T, early investor in ASOS.
- Jimmy Nguyen – Partner, David Wright Tremaine, and Senior Advisor to Ariadne Capital, who has the IP experience and manages the IP portfolio for Ariadne; with Jimmy, Julie is devising the patent and legal framework for EC 2.0 and the ‘Identity Object’ value proposition.
- Kevin Telford – Senior Advisor and Venture Partner, global expert in consumer data; Kevin has unique insight into the data landscape which is valuable to the EntrepreneurCountry’s plans for the ‘Identity Object’.
- Nigel Burton – Ariadne shareholder, serial CFO, investor in tech start-ups.
- Travis Baxter – Senior Advisor and Chairman of Ariadne’s Fund Investment Committee; ex MD of Bauer Radio; Advisor to the Bauer family; Operating Partner, Advent International (5 years);
Ariadne Capital is building the conditions for Ecosystem Economics to become the dominant paradigm in Europe for successful innovation and growth by and for its established and emerging companies.
Ariadne Capital will focus on industries which are being transformed into ecosystems by virtue of the user-centric opportunities. For example, Property, Construction, Energy, Communications, Internet of Things (IOT) and DIY Retail are all in and of themselves industries. But by the emergence of smart phones and individuals’ desire and intent to have homes whereby they can live in new ways, these industries form a cross-industry ‘ecosystem’ – which is referred to here as the Smart Home. The following graphic shows the various ecosystems that Ariadne will help to build.
Ariadne Capital has synthesized 5 key intellectual influences into its strategy which are summarised below:
- Prof Carlotta Perez and The Theory of Disruptive Technology and Adoption (published in 2001): Perez explains that every 60 to 80 years, society moves from a new disruptive technology to a new common sense. We are today in 2015 in the beginning of the second half of the Perez cycle.
- The Empire Strikes Back.
- Ronald Coase and The Nature of the Firm (published in 1937): Coase demonstrated that corporations emerged to handle transaction costs. This quite self-evidently has moved on.
- Today individuals are transacting in ways that decades ago only corporations might have done.
- Hernando de Soto: De Soto assigned property rights to Peruvian farmers and demonstrated that behaviour changed as a result.
- When people have assets, they can build wealth. Data is the most fundamental asset.
- Prof Chan Kim and Renee Mauborgne, Founder of Blue Ocean Strategy: Julie’s Strategy Professors at INSEAD; they have identified that companies win not by outcompeting, but by creating a new zone of competition or blue ocean.
- EntrepreneurCountry works with its clients to help them find a new zone in the future where they can be leaders.
Geoff Moore, Crossing the Chasm – This classic in the world of technology marketing helped a generation of new technology firms identify their Early Adopter segments which would pull them into their native market.
- EntrepreneurCountry helps its clients engage with early adopters of new propositions forged with Digital Enablers.
- synthesized these influential thinkers’ key points along with
- Ariadne’s own analysis of why the digital platform companies in Silicon Valley are winning as well as
- the insights into the future that 15 years of Ariadne portfolio entrepreneurs’ visions and strategies have afforded them to posit a thesis as to how to win in the digital age. Ecosystem Economics has become the methodology that Ariadne Capital invests against and which they embed in their client engagements.
Ariadne Capital invests in ‘Digital Enablers’ (enabling technology high growth early stage firms in Europe) who intend to transform industries by their engagement with the existing incumbents who, in turn, require the ability and a mechanism to shift to becoming a platform with network effects and digital revenues in exponential growth mode.
EntrepreneurCountry Global (EC Global) provides those traditional, non-technology incumbents (from various industries) with a ‘marketspace’ whereby they can figuratively and operationally ‘go to the future’. EC Global enables ‘Goliaths’ to reinvent their industries, to test pilot both hypotheses about the future of their business and industry as well as to engage with applications and consumers in an iterative way. One could think of one part of the value proposition as a ‘Corporate Application Beta Platform.’
EntrepreneurCountry enables firms to become Ecosystem Economics™ companies that is to adopt the design of how to win in the digital age. This process is accomplished through a programme of advisory services today, and will be done in a digital platform in 2016.
There are 3 basic tenets which lead to a firm understanding intellectually how to become an Ecosystem Economics firm:
- First of all, they need to understand that industries have shifted to be organised around platforms. These platforms are organising the economics of the ecosystems in which they operate. In order for a Goliath to win, they need to move from being a company with distribution which is selling product to a platform with understood customer segments where revenue exchange for value accrues per users. Life time value of users and the cost of customer acquisition become the key KPI’s.
- Secondly, they need to understand how to engage upwards with the Application Economy which is at the core of being a platform. This means that in the choice of how Goliaths engage with David’s – invest, partner, or acquire – that the first step towards creating value is actually to build a Digital P&L rather than to touch the balance sheet through investment or acquisition.
- Thirdly, they must recognise that they as Goliaths won’t beat David. Entrepreneurs have the consumer insights which unlock the future of industries through the products and services that they create. Ariadne has not found examples of where non-technology traditional businesses have been ahead of the market in turning consumer insight into a market-leading product. Entrepreneurs have a big problem in terms of how to get to market: customer acquisition. They are ‘cars’ in search of a ‘highway’.
Ariadne’s huge advantage of seeing more than 100 start-ups monthly who are looking for funding as well as engaging with thousands of start-ups across the EntrepreneurCountry platform enables us to see how the business models are changing. Through this, we are able to aggregate visions of the future into a coherent design of the future. Goliaths focus on market share, share price and the macro issues. But the future is being defined at the micro level. Ariadne has understood that Unit Economics shapes not only products and companies but industries and ecosystems.
It is clear that consumer data is being used to drive the development of all applications. However, many industries do not put the end user or individual at the heart of their business. As a case in point, the oil and gas global industry may collectively believe it is very far away in terms of consumer usage of energy, or the development of the ‘smart home’ but it is not. Large energy companies who understand how consumer behaviour is changing will be leaders in the future.
So Ariadne and EntrepreneurCountry understand that for large industries to become ecosystems and for the leading firms in the traditional industries to become leaders in the future ecosystems, they have to understand the Unit Economics of the transaction and how consumer behaviour is changing the business model which is changing the industry. It tends to be difficult for Goliaths to believe that the entrepreneurs who are operating emerging, fast-growing businesses with radically different approaches to how industries should work will be proven right.
Both Ariadne Capital as well as EntrepreneurCountry have developed a ‘proof of concept’, a deep library of learnings from the ‘burning building’ of creating start-up / high-growth digital ventures, many tools and templates, and a design for growth with significant intellectual property for their mutual engagement which will be scaled. Because of the work done to date, the future of Ariadne Capital at scale has been significantly de-risked.