EUROPE GAMBLES ON HIGH TECH

In increasing numbers, European financiers are shrugging off their traditional conservatism and discovering the definition of venture capital that their U.S. cousins have always embraced taking a chance on an unproven idea or technology. To be sure, the spirit of risk taking varies from country to country—the U.K. is much more daring than West Germany, for example. But according to accounting firm Peat Marwick McLintock, last year—for the first time ever—there was more venture capital available in Europe then in the US. ($4.3 billion vs. $4.2 billion). And these funds are footing the bill for more and more European high-tech startups. Entrepreneurism has long been stifeld in Europe by high taxes and a staunch aversion to risky business. “Ten years ago we did a study of young technology-based firms in the U.K. and Germany, and could find hardly any examples, recalls Kamel Saad, vice president of Arthur D. Little Inc. in Brussels To day, he says, the numbers are “orders of magnitude” higher—partly because of falling taxes in many countries (especially Holland and the U.K.), but also because of basic attitude changes prompted by the approach of the unified European market of 1992. Venture funds are not limited to technology companies, of course; food products and retailing are also popular targets in view of the larger 1992 marketplace. But the search for high-tech innovation, backed by a sound business strategy, has never been more intense, says finance director Tim Church at London’s Advent Ltd., a venture capital firm capitalized at about $250 million. “And in terms of technology and management, the quality of today’s deals are higher than ever,” says Church. One such venture, launched by Advent in 1985, is Computer Security International, of Brighton, England. The small firm designs and installs data security hardware and software for banks and other financial services firms throughout the U.K. The package that Advent put together in founding the firm—in terms of both technological expertise and financial backing—was so appealing that Church was able to lure William Seabrook, a British businessman who had left the U.K. almost 25 years before to pursue high-tech opportunities in Silicon Valley, back to his home country. Today, as managing director of Computer Security International, Seabrook proudly notes that last year’s revenues hit $7.2 million—a big jump from the $2.8 million the startup realized in 1986. Total investment in the company is divided between Advent and 14 other firms, and now stands at about $4.7 million. Seabrook notes that there are several reasons for the new entrepreneurial climate. “Ten years ago it was almost impossible to raise startup money, mostly because it was such a novel idea and no one knew how to do it,” he says. “Taxes were much higher than now, and the banks did not consider that their primary business. The U.S. was the main source of funds, but most small businesspeople felt it wasn’t worth the effort.” As a result, most new companies were spawned as corporate spin-offs or subsidiaries—or by the occasional daredevil with well-placed friends. U.S. science entrepreneurs also should note the change in the venture capital climate. Increasingly, European investors are shucking their traditional parochialism and financing innovation in other countries, as well. For example, Advent recently raised $7 million to help seven-year-old Xoma (a Berkeley, Calif., biotech company), and five other U.S. companies set up British facilities; meanwhile, San Diego’s Biomagnetic Technologies—a maker of neurological diagnostic equipment—is one of six U.S. companies with hacking from the $29million Glide Venture Fund in Utrecht, the Netherlands. —H.G.D.

EUROPE GAMBLES ON HIGH TECH

The Scientist Staff

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