Investing in new firms

Two new business holdings funds are being set up in Greece, amounting to 45 million euros in total, aiming to invest in newly founded enterprises in Greece and the Balkans with the support of the US business holdings firm Draper Fisher Jurvetson (DFJ). The American company – famous for its preference for investing in enterprises at their primary stages – was recently in the news for the great yield it secured from the sale of web-telephony firm Skype, of Estonian origin, to the US electronic auction company eBay for $4.1 billion. DFJ Faros, the company that manages the two funds, recently brought to Athens the founder of DFJ, Tim Draper, within the context of its presentation to interested investors. The capital is currently being collected, with company officials appearing optimistic after their contacts over the last few weeks. Draper, as the third generation to be involved in venture capital, is well-known in the market for his high-risk investments in the technology sector, as well as for a theory known as «viral marketing.» Its core idea is that small companies can use the Internet to communicate their products and increase their revenues without large expenses. Last week Draper had meetings with government officials and known entrepreneurs, and spoke to Kathimerini about the reasons that have brought him to Greece and his «international campaign,» as he calls it, for the strengthening of innovation and entrepreneurship. For some years now he has «lent» the famous brand-name of DFJ to entrepreneurs across the world so that they can invest in new innovative companies. «We have a mission,» he said, «to expand venture capital and entrepreneurship across the world.» He believes that the Internet offers the means for developing new companies, creating in essence a whole new industry. «Who says the Skype phenomenon cannot be repeated in Greece?» Draper asks, «as long as the government creates the right conditions for the development of innovation and entrepreneurship and people can be found to fund an idea.» He claims that DFJ has already invested in three companies headed by Greeks, which convinces him that innovation exists but needs an appropriate environment in which to bloom. He even cited the examples of companies such as Athena Semiconductors and of Q-Mobile which began in Athens, but found international investors in order to grow. «Governments have realized that with the lifting of borders, they have to make their countries more competitive and help new and potent people emerge,» argues Draper. He adds that several sectors linked with the Internet, such as P2P (Peer to Peer) which allows many computers to be connected to one another, or video transmission through the Web, etc. provide a number of growth opportunities. It was thanks to the view that P2P has great scope that Draper met two years ago with Estonian Niklas Zennstrom, who along with his compatriot Janus Friis had developed the well-known program KaZaa, and later Skype. DFJ invested about $10 million in Skype. One of the most profitable investments by DFJ is also Baidu in China, which operates a search engine on the Internet and whose shares have shot up. Draper sees similar margins in markets such as «pure» energy-producing technologies and nano-technology. Yet why it is that DFJ insists on investing in new companies when virtually all major venture capital firms have turned toward more mature companies? Last year in Europe the majority of investments made by venture capital firms went to the so-called management buyouts, or MBOs, where known companies or subsidiaries of strong groups were purchased with the aim that they be restructured and then resold or floated on the stock market. Draper repeats that «we have a mission,» adding that DFJ’s high-risk investments are followed by great returns. Greece is but a stop on Tim Draper’s «campaign.» He has decided to back DFJ Faros, thinking that this country could become a launch-pad for the Balkan markets. Another reason might be that one of DFJ’s top officials in the US is Dimitris Stavropoulos, the company’s chief executive. The first of the two DFJ Faros funds will operate in Balkan markets, while the other will operate in Greece with the support of the New Economy Development Funds, established by the Ministry of Finance. In Greece today there are no business holding companies investing in newly founded enterprises. Most new entrepreneurs who found funding over the last few years when their companies were in the primary stages had actually convinced certain American or European funds to back them. If DFJ Faros, as it aspires, concentrates the capital required for the two funds rapidly enough, then it will have to prove that there is indeed innovation in Greece by investing in new enterprises.