I was contacted recently by an Amsterdam-based Venture Capital firm which, after following blognation, expressed an interest in the Italian market and the innovation happening within Italy. It’s not an easy task to navigate around the Italian ecosystem for non-native speakers, so I was delighted when Managing Partner of YL Ventures, Yoav Leitersdorf, agreed to an interview about what has caught the VC’s attention and why Italy is of interest.
BN: Can you tell us briefly about YL Ventures?
YL: YL Ventures is the only venture capital fund we know that is focused on medium-size exits rather than home-runs. We look to invest in companies that we believe we can sell to strategic acquirers that we know within a relatively short period of 6-18 months, at valuations that are easy for the acquirers to digest but still generate a great exit for the entrepreneurs (typically 20m-40m Euros). We don’t invest in order to build big companies, but rather we take teams to rapid exits that will see them integrated into large players in their industries.
BN: Italy is not traditionally seen as one of the hot beds for web 2.0 innovation in Europe, although development and innovation does take place. What is attracting you to find out more about the Italian market?
YL: It is true that Italy has still not made a name for itself as a burgeoning high-tech entrepreneurial hub. At the same time, Italy is a world leader in design and creativity, and boasts some of Europe’s best academic institutions. As the Italian entrepreneurial ecosystem matures (thanks in part to such initiatives as blognation, OpenCoffee and BarCamps, and high Internet and mobile penetration), I believe we will see more and more tech innovations coming out of Italy. YL Ventures simply wants to be there as it happens.
BN: What technologies / sectors within the industry are of most interest to you?
YL: YL Ventures specializes in the Internet, telecom (mostly mobile applications) and digital media sectors. Within these, we will pretty much look at anything as long as it’s got real proprietary technology in the form of software. We look for software that is cutting edge, proprietary, protected, differentiated, clever, and/or disruptive. We are not interested in content, e-commerce storefronts, social networks or other applications that have limited proprietary technology.
BN: What do you look for when funding a company?
YL: We look for technology-oriented products and great teams that our strategic acquirer partners would be interested in buying 6-18 months from our initial investment. When we look at companies, we put on an acquirer’s hat and figure out whether an acquisition would make sense. We also look for management teams that are technology-oriented and reputable. We look for companies that have products that are ready or almost ready, and that have low burn rates due to very efficient use of capital. Revenues and profitability are not requirements.
BN: Can you give us 5 tips for increasing a startup’s attractiveness to a VC?
YL: Five things that a start-up can do to increase its attractiveness to a VC are:
1) Action rather than words – have a real working product (even a prototype) rather than describe it in a PowerPoint
2) If you believe your management team is incomplete, get it fully-assembled before seeking capital.
3) Appearance is important – make sure all documents and your Web site are immaculate and super-professional.
4) Keep a low burn rate – be very careful about how you spend your cash.
5) Be realistic about your valuation and about your exit potential.
BN: What companies have you funded in the past?
YL: YL Ventures had its first fund closing in April 2007, and we will announce our first investment shortly. The team has had many prior successes, including Movota, a London-based mobile software company that was founded in 2004 and sold to Bertelsmann in 2005, and ExchangePath, a New York-based Internet payment software company that was founded in 1996 and sold to CMGI in 1999 for $25 million. YL Ventures’ investment strategy stems from the principles’ successful track records.
Company Index: YL Ventures
