Companies that have new innovative products or technology need capital to fully develop their products and bring them to market. Since many of these companies are new, or the technology they are working on is unproven, many traditional sources of capital are closed off to them. To fill this gap, venture capitalists will provide seed money for these companies in exchange for an equity, or ownership, position in the company.
A new article from the Seattle Times says that this trend may be coming to an end as more and more VC’s start looking to Europe to invest (http://www.seattletimes.com/business/technology/venture-capital-turns-its-attention-to-europe/). Led by Google, Intel, Microsoft, Salesforce.com, and Sequoia Capital, the charge to pump money into new firms is on a headlong rush.
Historically European companies haven’t attracted much interest from the VC community for a couple of cultural reasons. While often offering a superior product or service, European companies have been content to service a more local customer base than their US or Asian counterparts. With most VC’s look for their investment to hit around 100 million euros in sales within five years, a timeframe that was unrealistic with the narrower service area European companies were content with.
On the positive side, start-ups in Europe are often less expensive to get started, and to operate in the longer term. An influx of a highly talented labor pool is also helping European companies stand out. This talent is coming from banks, investment houses, high-tech engineering and biotech firms that have been trimming their own payrolls in the past few years.
One company looking to make a profit from European VC is Dallas, TX-based Highland Capital Management. The company was founded by Jim Dondero in 1993 and has $23 billion in assets under its management. With experts in emerging markets, healthcare and real estate, Highland is in a prime position to carry its award-winning investment philosophy to the European markets.
Jim founded Highlands after gaining a number of years of experience in the corporate credit and bond markets. He began his career after graduating from the University of Virginia with a dual degree in accounting and finance. After working with American Express and Protective Life, Jim founded Highland and innovated the use of collateralized loan obligations to help companies with less than investment grade credit obtain the capital they needed to grow.