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May 02, 2006
Partech: European VC Interview Series
What's the expert view on M&A prospects for venture-backed optical components developers? Where are VCs looking to invest? These are the some of the questioned answered in the first of a series of interviews with European venture capital firms, published by the alarm:clock euro.
Today, Partech, one of the older VC firms in Europe, is getting the treatment. Philippe Crochet, pictured below, who is based in Paris, agreed to do an interview with the a:c euro via email.
He's the Partech investment manager responsible for chips and communications investments (working with Partech partners, Jean Marc Patouillaud and Helmut Schon), which just happen to be two of the hottest sectors in Europe in attracting VC money these days.
Unlike a lot of the larger VCs here, Partech doesn’t invest in life science in addition to tech, it only invests in IT, including Software & Internet, Healthcare IT, and Communications & Components.The firm invests from offices in Paris, San Francisco, and Israel.
We note that Crochet included the URL for portfolio companies in his written reply to our questions. We like that kind of proactive behaviour and have left them in.
How was 2005 for Partech? Just the European market, please.
New investments in 2005 included leading an €24.5M round of investment in Dibcom, a French company working in the area of chipsets for the reception of Digital Television in portable and mobile applications.DiBcom’s technology has been used by a number of tier 1 customers in the automotive, notebook PC, cell phone, and portable media player (PMP) market segments.
We also took part in the €16M financing round for B3G , a VoIP operator founded in France in 2001. Operating both in France and in Europe, B3G Telecom addresses key telecom operators and telecommunication professionals with a “wholesale” service offer. B3G also addresses the enterprise market with an exclusive indirect channel distribution strategy.
Lastly, we refinanced Realeyes3D, co-leading the round with Atlas. Realeyes3D is a leading provider of advanced image processing applications for camera phones. For example, its technology enables cameraphone to act as mobile scanners. I recommend everyone to try the early beta version on Click to Scan. It’s pretty amazing.
On the exit side, we sold three companies from our European portfolio to US buyers, namely DCT (to Veritas), Meiosys (to IBM) and Dedigate (to Terremark Worldwide).
Mobile TV is an area attracting a bit of attention now, how is Dibcom doing?
We have been pleasantly surprised with the adoption and the momentum of DVB-H and with the launch of the first DVB-H based mobile TV offering in Italy this year. Many other countries will follow. This is a very exciting space.
We noticed the Passave acquisition last month. Are optical networking companies in line for some M&A activity?
During the bubble there it was said that over US$1B was invested in optical programs. This sector totally crashed for years. The survivors that are emerging are starting to see reasonable growth on their optical core businesses.We are again seeing optical companies coming to the VC market that have revenue growth and can have some semblance of profitability in sight. In addition, the FTTX market is growing and as carriers enter the IPTV market, copper is just not enough bandwidth into a home which is driving demand.
The combination of more revenue, growth in demand, and startups finally getting closer to cash flow breakeven, and cash flow positive, will allow for a more healthier M&A environment.
Not an optical company per se, but we have in our portfolio the only startup remaining in the PON, namely Teknovus, with more than 2 million lines shipped and over 20 carrier wins.
What effect will the Lucent/Alcatel merger have on potential trade sale exits?
Well, it is difficult to tell on the long term although I doubt the combined entity would acquire more companies than the two separate companies. In the short term, the two companies will be certainly too busy with the merger to look for new acquisitions.
There have been few exits for VC-backed chip companies in recent months. Why is that?
First of all, you have to take in account the relative percentage of chip companies amongst VC backed companies. Secondly, there has been a number of nice and significant exits recently.
PMC Sierra has acquired Passave for $300M, Texas Instruments has recently completed its acquisition of Chipcon based in Norway for $200M, Broadcom paid nearly $80M for Sandburst.Going back a bit further, one should of course mention as well other European successes such as CSR [Cambridge Silicon Radio] IPO or the Alphamosaic (by Broadcom) acquisition.
How is dealflow? And related to that, are you trying any new or innovative ways to attract alpha geeks and/or serial entreprenurs?
I am not sure there are very [many] innovative ways to attract serial entrepreneurs. Relationships take years to be built and we try to manage the best we can an international network created during the 25 years of Partech existence.As an example, Christophe Bach and Patrice Giami, ISDNet founders, in which Partech was an investor, came back to us when they decided to finance B3G and we very happily decided to join their new venture.
But at the same time, we also try to stay very close to the research centers and keep our eyes very wide open for the new talents to emerge. At the end of the day, I am convinced that only long term professionalism can guarantee a healthy deal flow.
Compare the attitude of entrepreneurs today to two years ago, six years ago, and ten years ago?
This is a very open question. Let’s say that entrepreneurship is definitively stronger in Europe today, with a new generation of young serial entrepreneurs that I find very impressive. I am not sure this is related to the money they may have made during the bubble, but rather a question of mindset and a strong experience and realism from the post bubble years.
Where are you looking to invest now?
Such spaces still include wireless, including various technologies such as 802.11n or HSDPA, but also the wireline reponse, namely broadband access and associated services such as VoIP, IPTV and many others, and eventually convergence. We are also of course still looking at enabling components, anything smaller cheaper, faster and with a lower power consumption.
Posted on May 2, 2006 07:17 AM | Posted to Venture Capital | Permalink
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