Follow the Entrepreneur Entrepreneurship Do you have the

“Follow the Entrepreneur” Entrepreneurship: Do you have the DNA? Presented by Julie Meyer 21 April, 2008 at Fortis Banque Luxembourg

What is it that you look for in an Entrepreneur? n The Athlete n The drive to build capacity and performance n Strength Coupled with n The Artist n The need and desire to create

Today’s Agenda n Julie Meyer and Ariadne Capital DNA n Does Europe have Entrepreneurial DNA? n What is the Entrepreneurs’ DNA? n Some European Entrepreneurial Success Stories

I. The Julie Meyer/Ariadne Capital DNA

Julie Meyer – American by Birth European by Choice An Entrepreneurial Profile n Julie Meyer – My Story n n n n 10 years experience of the venture capital and Internet industries 20 years experience advising tech firms including Motorola, HP, 3 Com Founded First Tuesday, network of entrepreneurs – n Put in $100, 000 of seed capital in summer of 1999, and Sold for $50 m to Jerusalem Global in summer of 2000 n Expanded into 100 cities, and was responsible for hundreds of millions of start-up financings Advised more than 100 companies over 10 years Raised more than $200 m for early stage companies over the past 10 years World Economic Forum Global Leader for Tomorrow Founded Ariadne Capital with personal capital in December

Ariadne – A Greek Goddess Helping Theseus get through the Labyrinth n n n n n Ariadne was the daughter of King Minos. From a chance encounter, Ariadne fell in love with a dashing Greek hero Theseus. Ariadne who helped Theseus to escape the Labyrinth by supplying the hero with thread used to navigate the tangled passages. Theseus promised to make Ariadne his bride, and he brought her with him when he left Crete and sailed for his home in Athens. But something happened on the way to Athens. During their journey, Theseus stopped to rest on the island of Naxos. However, when he set sail again he did not take Ariadne on board - he simply left her alone on the island. Ariadne was devastated - her love had abandoned her. As she was crying and lamenting her cruel fate, a miraculous event took place. The god Dionysos appeared and rescued the forsaken heroine. In some versions of the myth, Dionysos then married Ariadne. In others, not

Ariadne Capital’s Mission is to BUILD EUROPE. NET by Entrepreneurs Backing Entrepreneurs

Market Scans The Entrepreneur is at the center of our world Morse – our technology partner Ariadne’s Our bedside manner enthusiasm - it’s contagious Needs Services Technology Ariadne’s Publications -Journal Needs support & -News of the Week Encouragement -Newsletter and Reports Needs Information & Intelligence Cap raising Services Needs to be in dialogue with potential acquirers Project X Needs Office Space The Entrepreneur Needs Momentum Needs Capital Principal Investments Execution Capability Needs Talent Needs Luck Ariadne Team Talent Introductions Experience, Perspective & Mentoring Investor Forum Media Relations Ariadne Dinners Sales Bus Dev UK Market Entry Needs Advice Interim Management M&A Services We create Luck 8

II. Does Europe have Entrepreneurial DNA? A Look Back in order to Look Forward

Europe has always had its backers of Artists, Adventurers, and Mavericks

The Medici Family was a powerful and influential Florentine family from the 13 th to 17 th century, producing three popes and a patron of some of the most famous works of renaissance art. n The Medici Bank was one of the most prosperous n n and most respected in Europe. There are some estimates that the Medici family was for a period of time the wealthiest family in Europe. From this base, the family acquired political power initially in Florence, and later in wider Italy and Europe. The Medici were great sponsors of art and architecture A notable contribution to the profession of accounting was the improvement of the general ledger system through the development of the double-entry bookkeeping system for tracking credits and debits. This system was first used by

Christopher Columbus ~ The 1 st Entrepreneur? Queen Isabella ~ The 1 st Venture Capitalist? The advisors to Isabella and Ferdinand were sceptical about Columbus’ plans, but to keep him from taking his ideas elsewhere, and perhaps to keep their options open, the King and Queen of Spain gave him an annual annuity and sent an order to all of Spain that he was to be given free food and lodging wherever he went. The Year is 1492 When they finally agreed to help him, Ferdinand was reported as having claimed he was “the principal cause why those islands were discovered". Contract between Columbus and Isabella & Ferdinand If Columbus discovered any new islands or mainland, he would receive many high rewards. • He would be given the rank of Admiral of the Ocean Sea. • Appointed Viceroy and Governor of all the new lands. • Entitled to 10 percent of all the revenues from the new lands in perpetuity • He would also have the option of buying one-eighth interest in any commercial venture with the new lands and receive one-eighth of the profits.

The Ariadne Hypothesis – Pre-meditated Sabotage n Entrepreneurs are not the Problem n Europe has had great entrepreneurs – great risk takers and achievers, and is starting to have great serial Internet entrepreneurs n The Financing of Entrepreneurship has not been World-Class n n The Financing of Entrepreneurship in Europe has not kept up with the rise of serial, successful entrepreneurs in Europe Although it’s changing…. n Europe may have the richest poor people of any other region in the world, but you can count on one hand the £ or € 1 billion companies that have started from scratch over the past 30 years. n Great entrepreneurs can be found on every continent n But there has been something pre-meditated about Europe’s ability to squash the ambitions or make it harder than elsewhere for Europe’s home-grown group of entrepreneurs.

What’s The Problem? Lack of Accountability n Well, in France, one is taxed on assets whether or not they are revenue-generating, and taxes reach 70% of one’s income. n In the UK, they are increasing capital gains taxes without consultation with the 4 leading business organisations – CBI, IOD etc n The EU Commissions’ financial accounts have failed to be signed off for more than a decade. n Many Other Examples n It is not difficult at all to connect the dots between government, their lack of accountability, their desire to control people’s lives and money, the growth of their intrusion into people’s lives, and a diminished entrepreneurial sector.

Is There a Problem? Feudalism Alive and Well n Many Europeans still see life through the Lord/Peasant framework; n n n They are willing to defer to the government, sacrificing individual freedoms and willingly accepting a heavy tax burden from the government as part of the implicit “deal”, which is to be “taken care of”. Once hooked, it is near impossible to get oneself of the dependency And more importantly, it creates an enormous drag on society and growth n Feudalism, no matter how subtle, cannot co-exist with meritocracy and freedom. n Building a Growth Story for Europe means taking individual risks and actions.

European Entrepreneurs – Net Contributers Driving the Growth story n Government needs to understand that it is the servant of the people, and that European Entrepreneurs are driving its growth story. n We cannot engineer outcomes – life can never be fair or equal n What the most important thing to grasp in one’s life however is choice. We all have a choice as to what we do with our lives. n Some of us choose to create, build and be a net contributor. Others are intent on taking out of the system whatever they can get.

III. What is the Entrepreneur’s DNA?

The World of the Entrepreneur n Nick Ogden, the founder of World. Pay, one of my 46 founding investors who are some of the leading European entrepreneurs said the following when I asked him what he was most proud of: “Never missing payroll”. n Entrepreneurs know where the buck stops. It stops with them and/or hits them smack in their forehead. n Entrepreneurship is not for the faint-hearted; it is about persisting and taking total accountability for a company and your life: the good, the bad and the ugly. n As Candace Johnson, one of the founders of SES Astra always says, “never give up, never accept no, and never go away – even when they want you to. ”

The Good News – Individual Capitalism is the Force of the 21 st Century n The good news is that in 2008, like a groundswell around the globe economics is trumping politics. n The TRIPLE PLAY of the Internet, Entrepreneurship and Individual Capitalism is bringing first world living conditions to people who previously were given aid and never encouraged to dream big dreams before. n n This TRIPLE PLAY means that we are losing the divisions that have historically separated the old and new worlds and different classes of people n Iqbal Quadir, one of the founders of the Grameen Phone, says so well: n “Capitalism was about empowered authority which didn’t necessarily activate the citizenry; the Internet stands that on its head, and shifts the power to the Individual – making Individual

Follow the Entrepreneur n He/she has the market insight n He/she is the value creator n He/she is the hero

‘The credit belongs to the man who is actually in the arena’ “It is not the critic who counts, not the man who points out how the strong man stumbled or how the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasm, the great venture and spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly so that his place shall never be with those cold and timid souls who know neither victory nor defeat. ” - Theodore Roosevelt

So, if Europe has Entrepreneurial DNA then why aren’t more global leaders built out of Europe? n It is still counter-cultural to be an entrepreneur in Europe; until that changes overall, the returns won’t be there systematically n Europe is feudal at its core n European established businesses are not used to buying from start-ups n It is still quite difficult to secure funding at a seed stage in European entrepreneurs need to expect success more n The World is Flat n The competitive playing fields between industrial and emerging market countries have been leveled

What Entrepreneurs do inside companies - They Get Out and Create a Market Storm n Entrepreneurs, if they're good, have the best insight into how particular markets are developing. They are in the "eye of the storm, " dealing every day with how markets are dynamically evolving. n Entrepreneurs also think differently. They see things that others don't. They feel compelled to make stuff happen, often simply because they see something that doesn't exist yet—and should. n Sometimes that blind faith leads to catastrophe, but more often, entrepreneurial insights eventually turn into step changes in how industries operate.

DNA Factor 1: Entrepreneurs are Unreasonable About Success n Entrepreneurs have a view of the market and/or a consumer behaviour, which drives them to bring an innovation to life. n Like becoming a Parent, if they knew what it would REALLY entail, they would think twice. n The good ones are slightly paranoid, and feel that they are in a race against time. n Which makes them learn how to: n n Act with Imperfect Information Never assume they control time Never give up – tied to their identity Expect Success

DNA Factor 2: Entrepreneurs Understand that You Know More Than You Think You Do n They trust their instincts and listen, hone and refine their instincts n They know what their “Unfair Advantage” is and Focus on it n Jerry Garcia, guitarist for the Grateful Dead, once said, “You do not merely want to be considered just the best of the best. You want to be considered the only one who does what you do. ”

DNA Factor 3: Invest in the success of others - Today’s World is an Ecosystem n The Businesses with Business Models which enhance and grow the ecosystem will win n Abundance Mentality n Focus on being a Net Contributor to the System rather than a Net Taker, and what you find is that your Sphere of Influence over the System increases n Focus on Long-Term Relationships

DNA Factor 4: Entrepreneurs are radically open to the World n Bill Joy, the former CTO and guru from Sun Microsystems, “assume innovation occurs elsewhere”. n Build reliable means to continually pull in what’s relevant and potentially threatening to your business n “We have to be in many places and get signals sooner, ” Henning Kagerman, SAP CEO in the Wall Street Journal Europe n Small things can indicate that large change is about to happen n Malcolm Gladwell’s The Tipping Point n Pay Attention – Nothing is Trivial

DNA Factor 5: Exact Accountability and build the conditions of Trust n Management is the search for accountability. Who is doing what, by when, why, and how, and most importantly, what happens if they don’t? n The best entrepreneurs and executives are both leaders and good managers. n There are no bad Lieutenants, Sergeants, Captains – there are only bad Generals n Trust is the Currency with which great businesses are built n n Trust is Efficient – Trust but Verify Economies who trust spontaneously develop and progress more rapidly – Francis Fukuyama’s book, “TRUST”

DNA Factor 6 – Create the conditions of trust so that great things can happen Trust is the currency of entrepreneurship – it is efficient; leadership is about creating the conditions of trust, and the combination of building counter-cyclically, paying attention to small change which indicates that large structural change is about to happen, seeking out inefficient markets, and investing in the success of others, leads to businesses that are both valuable and sustainable.

IV. Some European Entrepreneurial Success Stories Skype, Monitise, Espotting, Spin. Vox

Skype Free Calls on the Web n n n Founded by Niklas Zennstrom and Janus Friis Marketing or Technology? n Superb segmentation of customers around early adopters n Founders had personal brands which they knew how to leverage Business Model n Free calls – Peer to Peer n Paid for Services on top Ariadne’s Role n Engaged in December 2003 to help with early business development deals n Skype hired [pre-arranged] 4 Ariadne team members Exit Strategy n Sold to Ebay in September 2005 Why Skype was important to Europe? n n Gave European Entrepreneurs the confidence that they could build global leaders as well from whatever corner they came from in Europe Consumerisation of Technology is here to stay

Monitise Leader in Mobile Banking The Mobile Becomes the Remote Control to Finances n n n Founded by Alastair Lukies and Steve Atkinson in 2002, joined forces with Morse, a listed Systems Integrator in 2003, secured JV with LINK, the UK association which provides the ATM/cash points in the UK in 2004 2006 saw the adoption of the Monitise platform by Royal Bank of Scotland, HSBC, First Direct and Alliance & Leicester Individuals can check balances, top up cards, and transfer funds via Monilink Monitise’s genius was to put banks at the center of mobile banking, and to keep them focused on the vision of interconnected mobile banking, rather than building proprietary systems which would have to be migrated over at a later date. 2007 – secured JV in the US with Metavente which gives

Espotting Pioneer of Pay for Placement Advertising n n n Founded in London in 2000 by Seb Bishop and Daniel Ishag Along with Goto. com (now Yahoo! Search Marketing) it was a pioneer of “Pay for Advertising” in search engines. European expansion paid off and revenues soared from just € 80, 000 in 2001 to € 41 million in 2003. Although successful, espotting did not have a strong partnership with any of the dominant search engines. When Google and Yahoo! started to dominated the market place, espotting merged with US company Find. What. com in 2004. The merged company soon re-branded as MIVA in 2005.

Spinvox Voice to Text n n n n Founded in 2003 by Christina Domecq and Daniel Doulton More than £ 100 m has been invested in Spin. Vox to date, with £ 50 m closing last month from Goldman Sachs and hedge funds They sell into Operators and Carriers globally, more than 25 deployments currently Have expanded into the US successfully Built world-class team Turning down acquisition offers Key Insight was to demonstrate market demand by getting consumers to use Spin. Vox, and then to march that market demand into the operators, using the market demand to secure the right Ariadne’s role has been to advise on funding, secure partnerships, network the CEO into discussions with senior

What do these companies have in common? n Built in the market downturn n Teams – duos as founders – one strong in technology, the other the business/commercial brain n They knew how to raise capital n They believe in the necessity of marketing, and understand that marketing trumps technology again and again n Ariadne backed them all! – either as an advisor or an investor

Entrepreneurs Don’t Play Small They are Fearless “Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, Who am I to be brilliant, gorgeous, talented, fabulous? Actually, who are you not to be? …. Your playing small does not serve the world. There is nothing enlightened about shrinking so that other people won't feel insecure around you. …. And as we let our own light shine, we unconsciously give other people permission to do the same. As we are liberated from our own fear, our presence automatically liberates others. ” - Marianne Williamson

THANK YOU If you would like this presentation or to get in contact, send me an email on julie@ariadnecapital. com www. ariadnecapital. com