Demo Europe: VCs Get Their Pick Of Hungry Start-ups

It’s a great time to be a venture capitalist (VC) in Europe, according to Hendrik Brandis, co-founder and managing partner of German VC firm Earlybird – because everyone wants your money.

Although the European scene is improving, the demand for funding still outstrips supply, Brandis told the first ever Demo Europe event, held at the Digital October conference centre in Moscow. This makes it ideal, evidently, for investors because the number of start-ups looking for funding means VCs are spoilt for choice.

No IP, No VC

It was a brave thing to say. The Demo event has become a fixture of Silicon Valley and has launched several successful firms over the last 20 years. It arrives in Europe at a point when start-ups’ need for funding is intense.

Brandis was addressing a hall full of those cash-hungry start-ups, and rubbed it in, emphasising his joy at being a VC in a straitened market several times.

The polite audience let him escape with his life, to appear in the following VC panel discussion which gave broader scope to the subject. This had a more moderate tone and presented a balanced view of the investment environment. Panel contributor Ali Karabey (pictured, left), managing director of 212, a Turkish investment firm, pointed out the problem with funding is that it is not spread equally across the start-up scene.

“Seven companies we helped start have come back to us looking for second round funding because they couldn’t find anyone else – and third round funding is even harder to find,” he said.

To be fair on Brandis (pictured, right), from his perspective the skill of choosing the right companies to back is what puts the “fun” into funding. But there is a dark side because VC’s often only make safe bets, backing companies which can show they have enough valuable intellectual property (IP) to reassure the funders that they can salvage a large part of their money through IP asset-stripping, if the business doesn’t thrive.

Perhaps the slogan for the session should have been: “No IP, no VC”.

Karabey said that entrepreneurs should learn how to push themselves forward with the vigour displayed by US start-ups. “They should not be talking about local markets but global ones in the connected world. They have to learn to show the fire in their eyes, their passion and motivation, and not just a good technical idea.”

Into the fire

Against this background, the Dragons’ Den nature of the Demo event saw hopeful start-ups pitching for attention. Drawn from across Europe and the Middle East, a parade of hopeful entrepreneurs laid out their wares before a judging panel.

Though every pitcher told a story to the best of their ability, the methods varied from sharp professionalism, through casual, to downright sloppy. To attract attention, we were treated to free balloons, street dancing troupes and, in one of the less penetrable presentations, a milking cluster – nothing to do with high performance computing but everything to do with cows and milking parlours.

Presentations were separated into groupings covering travel, cloud, personal productivity, mobile, and music. Finally, there was a miscellaneous section – which is where the milking cluster came in – fortunately without a cow attached.

At the end of each pitch, the judges gave every contesting company a good grilling to plumb the depths of their strategic planning. There were also similar sessions for companies in their pre-start-up alpha phase. But in both cases, the products was more of a mashup of ideas rather than truly innovative, disruptive technologies that would set the world on fire.

Small beginnings…

After two days of pitching and bitching, the 90-second AlphaPitch winners were selected by Lars Buch, CEO of the Copenhagen StartupBootCamp. The winners all get an immediate opportunity to pitch at the next BootCamp selection event in Berlin in July for a chance to win mentorship through their early developmental stages.

The European Boot Camp has already attracted 500 applications. These will be whittled down to 20 for the actual event where the AlphaPitch victors will compete to reach the final 10 that win mentor assistance.

The selected projects were:

• RuTuner.fm – the first VoIP social network with voice-based media services. At the moment, only serving Russia, RuTuner.fm works using voice messages and can be used  through a toll-free number when a connection to the internet is not available.
• Realtime Board – a digital whiteboard allowing users to collaborate freely and visually about business processes or everyday life. It can be used to draw, create sticky notes, write text or upload PDF files – even from Google Drive. All changes are displayed and saved in real time for every participant.
• WeStudy.In – an educational counselling portal for students studying, or considering studies, overseas focusing on paid-for services for students and young researchers from Russia and CIS. Among the services are counselling and advice on all areas of overseas studies: educational programme searches, scholarships and internships, or accommodation and social advice.
• Amplifr – a publishing platform for musicians, artists and media people (sports, TV celebrities, actors, politicians). Helps users to create and manage their website, newsletter, social media (Tumblr, Facebook, Twitter) and other profile media (SoundCloud, YouTube).

A special cloud grant award from Microsoft of $60,000 (£40,000) worth of Windows resources and hosting was presented to HowToSpend (aka Kudapotratil) – a personal finance planner which shows how to repay loans while achieving financial and personal goals. Balancing debt repayment against satisfying needs for holidays, car purchases and other incidentals.

Greater things

But the top Demo God Award was won by the GroupVisor Networking Management Platform – this service helps business professionals to combat the difficulties of maintaining relationships with a growing network of contacts and to make profitable use of them.

This social CRM application creates a sales channel between a company’s employees and their customers. The Demo God Award recognises the merits of the winning company and GroupVisor has been invited to be showcased at the principal Demo meeting in Silicon Valley.

The debut of the company at Demo is quite likely. GroupVisor still counts as a “European” company, but has already followed many other start-ups and moved its head office to California… perhaps to find friendlier VCs for its next stage of investment.

It might be useful  if the next Demo Europe could address how we can keep start-ups from deserting to the Valley and boosting the US economy rather than Europe’s – but that would be unlikely since Demo is a Silicon Valley institution – which  is why we were treated to an arms across the sea (no, not nuclear arms) presentation from the US Ambassador to the Russian Federation Michael McFaul.

The US version of Demo, in its 20 year history, has promoted plenty of start-ups from round the world. Netscape Navigator, Java, Skype Mobile, Palm Computing, and Salesforce.com have been winners. This was Demo Europe’s first year so who knows what will be there to be discovered in the next two decades.