Recently people may have done a lot of daft things before the market reminded them of a few business fundamentals they had better not ignore. But, as far as Ken Olisa is concerned, there’s no escaping the fact that the explosion of entrepreneurial activity late last century has done the world a lot of good. It’s just that it will take a while for the benefits of the boom to materialise fully, particularly outside the US.
Olisa is chief executive and chairman of Interregnum, the London-based IT investment and advisory firm he founded in 1992. The firm’s approach to growing technology businesses is one that its founder thinks has scarcity value in Europe but is getting increasingly common in the US.
Bain Capital is the American example Olisa cites as the business model Interregnum has adopted. It is based on industry experts and consultants raising and investing money. It has built a following in the US but less so over here, he believes.
“In Europe, we're just beginning to move into this cycle,” he says. “My own company is all about adding business and marketing expertise to budding entrepreneurs and then applying the capital, and we think we're at the beginning of a curve that will be the antidote to the anti-risk culture [that historically existed in Europe].”
The difference between risk and anti-risk cultures is a major theme in Olisa’s discourse. Their respective presence on either side of the Atlantic is one of two factors he says one needs to grasp to understand why US entrepreneurs have done so much better than their European counterparts. The other is the availability of capital.
“US people have a magnitude more confidence than Europeans. Confidence and capital are inherent in the US model and that drives the creation of wealth over there.”
Capital is currently in short supply on either side of the Atlantic, but Olisa is confident that this won’t last. He’s sure that it will take Wall Street no more than a couple of quarters to switch out of fear mode and back into greed, and then there will a wall of money let loose.
But whilst financiers are still licking their wounds and recovering from recent excesses, international entrepreneurs have not for a moment lost their – in the case of Europeans, newly found – passion for turning ideas into businesses.
“The genie is out of the bottle, and no one can ever put that energy back in again”, says Olisa. “The desire to innovate does not go away just because Nasdaq has cought a cold.”
That Interregnum still receives some 150 approaches a month from people eager to build a company seems evidence enough that this is indeed so.
And Interregnum invests. Last week the firm gave a million pound each to Respond, a customer retention software vendor, and Link, a web based developer of enterprise software applications. Earlier this month it invested alongside 3i and Abbey National in Adaptive, a UK software maker, in a £1.7m deal.
What portfolio companies are getting on top of the cash is the Bain-style business expertise mentioned earlier. Olisa says it’s high maintenance and therefore expensive. “A venture marketing executive at Interregnum will have 5 portfolio relationships and will expect, on average, to spend about a week per month on each of them. There is a big involvement with our investments, not just popping into board meetings and looking at management accounts.”
This according to the Interregnum school of thought is the only way of getting fledgling companies through the painful early stages. And that’s what VCs ought to be putting all their energy into.
For in the grand scheme of things, it is successful IT entrepreneurs whose innovations drive productivity around the world – and Olisa has no doubt that they will do so from hereon: “There is little to disappoint at the moment – things are pretty rosy.”