Madison Darbyshire in London
Some 2,000 start-ups and 1,500 investors will arrive at Web Summit on Monday for three days of frantic speed dating.
But for the bosses of the technology conference being held in Lisbon, Portugal, standing on the sidelines and playing matchmaker is no longer enough. In May, Web Summit filed paperwork with the SEC to open its own $50m venture capital fund, Amaranthine.
“Look, we help some companies in a really huge way for three days,” said Paddy Cosgrave, the chief executive of Web Summit. “What about the other 362 days?”
Data collected at the event about which start-ups receive the most attention from investors, and what trends are emerging, will underpin the fund. It will take minority stakes in companies at all stages, said one person familiar with its strategy.
To attract start-ups to its fund, Web Summit is offering access to the connections it has made in six years of building up its conference, an asset that tech founders increasingly demand from their investors.
“When we talked venture capital 10 years ago, it was all about access to finance. It was a VC choice game,” said Siobhan Clarke, a partner at venture capital fund, Episode 1. Now, “It’s not just about the capital any more, it’s about the value-add.
“Not all venture capital is created equal,” she added. “At seed stage, it’s about transformational contacts like customers, advisers to board, building networks and customers.”
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Companies in the start-up ecosystem with “added value” such as a large network, access to a customer base, or deep experience in a specific industry are becoming more attractive to start-ups, and are increasingly moving into venture capital.
“There are a bunch of organisations that are really good or better than a venture capital firm at one of those two things, because it’s all we do,” says Rohan Silva, the co-founder of Second Home, which offers office space to start-ups.
Second Home, which raised $25m in its last round, has also had discussions with its own investors about a move into venture capital, he added. Second Home is choosy about which start-ups it will work with, and helps to connect them to each other. It also offers business education, mentoring and a route to investors.
The move to venture capital, Mr Silva said, seemed to their investors like a natural way to monetise what it is already doing.
“There is so much fund formation right now,” says Jeff Grabow, the US head of venture capital for EY. This year will set a record for the amount money put into venture in the US alone, likely to break $120bn in 2018, up from $86bn in 2017, according to Dow Jones VentureSource.
Amaranthine will be led by Patrick Murphy, previously of Goldman Sachs and Universal’s venture arm, and Web Summit co-founder David Kelly, according to its website and SEC filing. Amaranthine declined request for comment, citing SEC quiet period regulations.
“Founders are getting smarter about who they pick,” says Par-Jorgen Parson of Northzone VC, the backers of Spotify. A traditional venture capital group, he has become used to working with more diverse co-investors as the start-up market grows increasingly competitive. “Most entrepreneurs want to combine capital and choose a partner who both can contribute value and who you can work with productively for seven to 10 years.”
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