Today, we spoke with Fred Destin, a Partner at Atlas Ventures in London. This interview has some great perspective on the success stories in Europe’s e-commerce and video markets. Here are the basics of Atlas Ventures:
- Has helped build over 300 companies,
- Is in more than 16 different countries,
- 47 of its investments have been acquired,
- More than 40 of them have gone public,
- Has aggregate market capitalization in excess of $20 billion.
Atlas Ventures is currently investing from its seventh fund and is managing over $2 billion in capital.
Listen to the Interview
Download the MP3.
The Challenges of Follow-On Rounds
Question: We have been hearing from investors that early-stage investing is quite healthy, despite the economy. The data seems to substantiate that. Because Atlas does all stages, I’d like your perspective on what is happening with later-stage rounds. Are they harder than normal? What hurdles does a venture have to overcome to get follow-on financing?
Skip to 1:07 in MP3
Summary: Fred explained the “bar bell” theory that many investors follow, by which they invest in either seed-stage, capital-efficient, disruptive ventures or very proven mature ventures. This leaves what Fred estimates as being 70% of companies in VC portfolios struggling for follow-on financing, despite the fact that so many of them are doing well and have great potential. Fred says that many VCs have raised the bar so high (i.e. low risk plus massive potential) that they are looking for “five-legged sheep.”
E-Commerce Success in Europe
Question: Tell us about e-commerce in Europe. It looks like a mature market with new energy all of a sudden. What happened?
Skip to 5:16 in MP3
Summary: Fred explains how the financial crisis is driving the migration online, and this is leading to very healthy growth in e-commerce ventures, even to the point of reaching a “frothy” investment stage of the cycle. He emphasized the reality of low margins and thus the need for massive scale. We had an interesting discussion about outsourced versus insourced logistics/fulfillment, and the differences between Europe and the US on this front.
Dailymotion and the YouTube Gorilla
Question: Give us your perspective on Dailymotion (one of Atlas Ventures’ portfolio companies). It is in a massive, fast-growing and hugely competitive market, with a gorilla called YouTube sitting in the middle. How does Dailymotion build value in that environment?
Skip to 12:55 in MP3
Summary: Dailymotion has around 60 million unique visitors, so it is doing something right. Fred couldn’t pinpoint one particular driver of success. We did have a good discussion (around 16:14) on the issue of bandwidth costs, specifically as it relates to the ongoing speculation on how much money YouTube is burning. He estimates that YouTube is spending less than $100 million a year on bandwidth, much less than the $470 million calculated by one financial analyst recently. Given Fred’s experience with Dailymotion, this estimate has credibility.
Listen to the Interview
Download the MP3.
