NBG Venture Capital’s NBG Technology Fund is first dedicated early stage technology venture capital fund in Greece € 60 million under management investing throughout Europe with an emphasis on Greece
Overinvestment in the context of the technology bubble 2000 now causes Fund underperformance and results in a major correction to all key indeces. Number of tech IPO’s, VC investments, VC funds raised all fall in 2002 by 35%. Only one IPO in the technology sector above €30 place in Europe between January and October 2002, compared to 5 in the same period last year. Industry sectors such as optical networking equipment face the most difficulties as a result of the combination of weak demand from Telcos and oversupply as a result of overinvestment. Few favorable sectors that maintain momentum (Wireless LAN) attract most of the attention leading to hypercompetition. Is Biotech a new bubble? Industry looking for the next “Internet” like opportunity (Nanotechnology?) VC’s return to investment fundamentals: non-crowded sectors and high margin businesses
A small number of exciting technologies may be “sleeping” in a lab Engineer cost is an advantage. However Greece will never be able to compete with countries like India or China in terms of labor cost and volume. Setting up a cost efficient company consuming less capital may make the difference between a mediocre investment and a star investment The quality and quantity of Greek diaspora resources in the US technology marketplace is impressive. Most are eager to get involved in a Greek venture as management, partners, customers, investors etc. The EU funded research, where Greece is a champion in terms of absorption, could provide the connection with the European technology industry. This connection could do away with the disadvantage of the lack of a developed local technology industry.
The potential for technology development in Greece remains to be realised. A number of existing small companies hold the flag: Thessaloniki an interesting case with companies developing and selling internationally software for the automotive industry, software for the textile industry and software for CD copy protection The semiconductor story: four venture/angel backed companies (Theta, Helic, Athena) , Atmel and Intracom. Design centres for major corporations (ST Microelectronics, Lucent) In sectors like Life Sciences, Greek Doctors (doctors take the buy decision) are in worldwide opinion leadership position in many disciplines. The analog semiconductor engineers case: some two dozen people with excellent credentials internationally 60% of Greek tech companies present in this forum going after the local market A lot of innovation is abandoned after the completion of an EU project in order for the researcher to move on to the next project. While EU projects provide networking opportunities with European corporates, Greek researchers are slow to leverage that.
Shortage of quality management skills as a result of lack of local technology industry to build them. Even higher shortage of managers that have been active in the international markets. The diaspora as well as expatriots is the obvious solution Greek research personnel is more interested in the EU R&D projects (a well known source of moderate revenue), than building a company out of the technology they have developed (potential major success but longer term and more risky) The average Greek engineer wants a safe job – a start-up is by definition not a safe employer. Stock options are not valued enough – people would prefer a small wage premium. Subsidisation is important in overcoming Greek location disadvantages. Similar programmes have been aggresively pursued in more developed markets (e.g. Germany – KfW provided up to 80% risk reduction) Numerous subsidy programmes announced. So far their impact is limited. Mainly subsidize fixed asset build-up. However, technology is based on intangibles. Praxe II and Eleutho provide hope. Development Law should provide special treatment of Tech companies. Subsidization however carries the risk of distorting the market.
Various approached to investing in Greek technology with an international arm close to the major markets (US and Western Europe) being a necessity. Conventional models (A, B) whereby we invest in a Greek company that builds an international marketing subsidiary or a newly founded international company of which the Greek company is a wholly owned subsidiary. Partnership models where investors work with an established international company in creating or developing the Greek company as an R&D division. This could be structured as a joint venture (E), a triangular relation where the VC invests in the international company which in turn invests to the Greek unit (D), or a relation where the VC invest in the Greek company, providing services to the international company with an agreement that the international company will acquire the Greek company once certain conditions are met.
NBG Venture Capital Investing in Technology Ventures:
Investing in Technology Ventures: Spreading across the globe Spyros Trachanis Investment Director
Venture Capital in the US: stabilized Investment Value in billion USD
But investors and companies now look beyond Silicon Valley <ul><li>Remote development centers for cost reduction </li></ul><ul><li>Leveraging larger talent pools </li></ul><ul><li>Moving closer to global markets </li></ul><ul><ul><li>Broadband in Asia </li></ul></ul><ul><ul><li>China largest and fastest growing mobile telephony market in the world </li></ul></ul><ul><li>New centers of venturing activity: Silicon Valley clones </li></ul>
Outsourcing: Go East! <ul><li>Gartner: Up to 25% of traditional IT jobs situated in emerging countries by 2010 </li></ul><ul><li>India leads the outsourcing wave </li></ul><ul><ul><li>80% of offshore IT outsourcing market </li></ul></ul><ul><ul><li>200.000 fresh Indian IT graduates p.a. and excellent quality technical education </li></ul></ul><ul><ul><li>€ 400 /month entry salaries </li></ul></ul><ul><li>China, Russia and the Ukraine </li></ul><ul><li>Outsourcing specialists: Ireland, Israel </li></ul>
Emerging Tech Superpowers <ul><li>China : Hardware and Semiconductors </li></ul><ul><li>India : Software and Life Sciences </li></ul><ul><li>Switches and routers </li></ul><ul><li>$3,8 billion Sales </li></ul><ul><li>PC’s and handhelds </li></ul><ul><li>$2,3 billion Sales </li></ul><ul><li>IT Services </li></ul><ul><li>$1,4 billion Sales </li></ul><ul><li>$10,2 billion Market Cap </li></ul><ul><li>IT Services </li></ul><ul><li>$1,1 billion sales </li></ul><ul><li>$11,2 billion Market Cap </li></ul>
Israel as an annex of Silicon Valley <ul><li>100 Israeli tech companies listed on NASDAQ </li></ul><ul><li>Q1 2004: 111 deals, $ 323 million invested </li></ul><ul><li>$1.5 billion expected to be raised by Israeli funds in 2004 </li></ul><ul><li>Wireless and security among focus areas </li></ul><ul><li>Could Israel be running out of capacity in relation to talent? </li></ul>
Where is Europe in all that? <ul><li>Technology industries where the EU maintains competitive advantages: </li></ul><ul><ul><li>Automotive </li></ul></ul><ul><ul><li>Aerospace </li></ul></ul><ul><ul><li>Communications </li></ul></ul><ul><li>Single European market progressing </li></ul><ul><ul><li>Growing cross-border M&A </li></ul></ul><ul><ul><li>Larger, Pan-European companies </li></ul></ul>
Takeaways for Greek tech companies <ul><li>Be extrovert – The Greek market is not enough </li></ul><ul><li>Leverage Greece’s geographic position: </li></ul><ul><ul><li>Regional players </li></ul></ul><ul><ul><li>Engage with larger European companies </li></ul></ul><ul><ul><li>Collaborate with Israel </li></ul></ul><ul><li>Focus and develop two-three areas with comparative advantage </li></ul><ul><li>Avoid high volume, low-margin business: China and India will win! </li></ul>