Bart Markus explains why it takes time and
commitment to build true global leaders.

In everyday life, patience is not known to be one my strengths. I definitely like to get things done, and in the operational management of our portfolio that trait is clearly visible. But when it comes to exiting the companies themselves, I know, like my partners, that a fast solution is not the best one in every case – in fact most often it is not. Staying power, long-term commitment and yes, patience, are necessary to support a young technology company through its inevitable ups and downs to its ultimate success. And that’s what characterizes our investment philosophy as well as those of Tier1 VCs around the globe.

In the US, the average time between first venture money into a company and recorded venture exits above $100M (the only ones that really matter for returns in our industry) is 6.5 years, and for IPOs it is 9 years. Times were different when I started my career in the VC business in the late 1990s. We had a period where it became the norm to stay with a company for a maximum of 3 to 5 years until a successful exit. That enabled the VC industry to create some tremendous successes quickly, but keep in mind that this was during the biggest bull market in history. And, although many of these successful companies definitely became truly world leading companies, in a business sense most of them achieved this status only after their early exits. Since this time, it has been back to business as usual, and though we have no doubt that the venture industry will continue its successes, we will need to show patience and stamina in order to earn the really big wins – the 'homeruns' as they are called in the industry.

Our Astaro exit last month is a case in point. After eight years in our portfolio, UTM specialist Astaro was acquired by Sophos, an event which provided us with a very attractive return. Two years ago an exit opportunity was created, and whilst we decided to reduce our exposure by exiting enough to recover our initial investment at a reasonable multiple, we chose to hold on to a large portion of our stake because we felt there was a fantastic management team in place that would be able to create even more long-term value. Last month we were able to sell the stake at a substantially higher valuation.

Simply hanging in there, of course, is not enough – this staying power has to be combined with a commitment to lead and structure follow-up financing rounds, as has been the case with some recent notable successes: with $41M, Enecsys closed the largest cleantech VC funding round thus far in 2011; and Adconion got access to a substantial working capital loan facility with Silicon Valley Bank that will help it to continue to fund its growth. Such large financings enable these companies to aggressively and quickly market their products and services on a truly global scale, the key to success in the world we live in.

But of course it does not start there. We invest in companies well before they are of the maturity at which fundings of that size are achievable. In February, we led a financing round for Artfinder at a time when the company was launching its Beta-version of the most comprehensive database of fine art online. In the following months, we closed two more seed rounds in companies that are just getting ready to introduce their products to the market. Furthermore, we led a new financing round for eWise in June, a global provider of a groundbreaking online payment solution for banks. All these investments are early stage and are meant to bring these companies to the maturity level of our other companies.

Over time, this has created a portfolio that contains both fast-growing companies with established track records as well as new players with disruptive technologies and excellent management teams that have the same potential. And with sufficient patience, I am sure we will see a lot of these companies develop into true global leaders in their respective industries.