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January 29, 2007
Why Amadues' Hauser Thinks Euro VC Is Like Goldilocks And More (Interview)
At $100M, the UK organic displays company Plastic Logic raised this month one of the largest rounds of venture capital in Europe for some time. So we asked for an interview with Amadues Capital Partners' Hermann Hauser, an early investor in the company, to find out how the syndicate was built, which led to a discussion about his track record, and what kind of companies Amadeus is looking to invest in now, and why he thinks European venture is having a Goldilocks moment.
...Our report is below the jump.
On The Plastic Logic Syndicate
Plastic Logic did not use a corporate finance advisor to raise its $100M round. Hermann Hauser said that he brought in two US venture firms to Plastic Logic's equity, namely Oak Investment Partners and Tudor Investment Corporation. The two new investors acquired a 30 percent stake in the venture and are now the largest shareholders, followed by Amadeus.
The Amadeus co-founder tapped existing relationships that he has with partners at those firms to close the deal. For example, Oak co-invested with his firm on Virata, which floated and was then acquired Globespan, now called Conexant. "It generated $200M for an Oak fund," Hauser said.
It is that kind of track record that attracts venture industry peers to his portfolio, while others point to it as proof that valuable tech companies can be created in Europe.
For example, Benchmark Capital Europe general partner George Coelho said (during an interview with this reporter last year for an article printed in another publication):
"There are great local success stories. Look at Hermann Hauser who has built three billion dollar companies."
The three firms are ARM in Cambridge UK, Virata (now called Conexant) and Cambridge Silicon Radio (CSR).
A more recent exit, although not quite a billion dollar deal, was achieved when portfolio firm Solexa was acquired by Illumina for $600M. "That is a great valuation for a company that is pre-profit," said Hauser. (a:c euro notes that Illumina now has the top rank in Forbes 25 Fast Growing Technology companies published this month)
His firm first invested in Solexa, a genetic analysis equipment company, back in 2001 at a $40M valuation. We remember wondering if Solexa's backers would ever get their money back on their investment, even if its equipment was ultra-fast in comparison to rivals. During the tech downturn the hype had all gone out of DNA sequencing. Most investors were not buying.
And yet the UK company's backers pumped in another $7M when they merged it with NASDAQ-traded Lynx Therapeutics, Inc of Hayward, Calif. in a stock swap valued at the time of the deal in 2005 at $55 million. It turns out to have been a smart move.
With Plastic Logic, Hermann Hauser is hoping to exceed his past achievements.
"I believe, Plastic Logic could be a $10B company," said Hauser.
Where to invest now?
Hauser said Amadeus is looking for companies with disruptive architectures that exploit trends in the market like Web 2.0 and wireless adoption, pointing to examples from the past and current portfolio, to illustrate what he means by that statement.
- CSR had a single chip Bluetooth system [when its rivals were delivering 2-chip solutions],
- Icera Semiconductor has a software-defined baseband chip [making systems its embedded in more flexible and able to handle changes in industry standards], and
- Plastic Logic has innovative, simple - albeit slower- polymer semiconductor technology that is being applied to displays that can be produced at a disruptive price.
A Demo Of The Plastic Logic Display
The latter two are recent investments, others include CacheLogic, benefitting from a new wave of video, audio and Web 2.0 type applications, IPTV gearmker Edgeware in Sweden, and Liquavista which is commercializing disruptive display technology for mobilephones.
This kind of top down approach is one way Amadeus shapes dealflow, the other is to be open to working with "proven entrepreneurs" to be able to back their next generation ideas, he said.
On Being European ---
Hauser is positive on the European market right now. He told the a:c euro it is a "Goldilocks environment". In other words, it's not too hot and not too cold; it's not too hard, nor too soft. And it isn't too big, nor too small - it's just right.
He also said that Europe still has to "prove itself":
"We never had any problem with technology, but there has been an issue about the quality of management. But that has changed. In Amadeus I, 15 percent of the portfolio had an experienced entrepreneur founder. In Amadeus II, it was 47 percent and in current investments it is now running at 90 percent," said Hauser, adding "We can now attract top management from around the world."
Globalization is expanding the scope and increasing opportunity for European ventures. Hauser said:
"It is an absolute must to achieve in the lead market, whether it is in the US, Europe, or Asia. In the past the US was the hurdle, still is for PC oriented startups, but when it comes to other technologies, mobile and wireless, for example, Europe and Asia are the key markets."
Posted on January 29, 2007 09:00 AM | Posted to Venture Capital | Permalink
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