Can you give us a brief overview of your company’s history and key milestones?
It all begun with a business called First Tuesday that I founded in 1998 and sold in 2000. First Tuesday started as a networking event for entrepreneurs and connected 45 cities across the continent with as many as 500,000 frequent attendees. It laid the foundation for an infrastructure connecting entrepreneurs on a pan-European basis.
After selling First Tuesday in 2000, I set up Ariadne Capital. Over the past 16 years, Ariadne Capital has been investing £600 million into game-changing businesses across Europe. For example, we invested in the first peer-to-peer lending company back in 2005: Zopa. We also backed the first pay-per-click deal even before Google became involved in the pay-per-click business. Additionally, in 2003-2004 we were the first advisors to Skype. Four of the people in my team actually joined Skype as business developers. It was the perfect example of incubation.
We set up the Ariadne Capital entrepreneurs fund five years ago and focused on late stage seed. We have invested into 22 companies, and all of this is now based out of Malta. We recently acquired Portcullis Asset Management. This acquisition gave us the licence that we needed to manage funds on a pan-European basis.
How does your investment platform work, and in what ways did the acquisition of Portcullis change your business model?
The acquisition of Portcullis did not change our model, it rather enhanced our current model by enabling us to manage funds across the EU from Malta. What makes our fund special is that we have opened it up as a platform and enabled other funds to plug in.
For example, a healthcare-focused accelerator in Helsinki interested but unable to invest as a fund can plug into our fund infrastructure in Malta. We take care of the risk, compliance and regulatory aspects, while our entrepreneur community via our digital platform ‘Entrepreneur Country’ can test-pilot the products.
The very first thing I did after acquiring Portcullis was to reach out to 10 different funds to ask them whether they wanted to plug in and join. Four out of the 10 were immediately interested. They can invest through our platform, and we charge a one percent management fee.
What kind of operations will Ariadne Capital run from Malta?
We have shifted the centre of gravity to Malta and created a top co-holding company, Ariadne Capital Group Limited. This company owns Ariadne Capital Malta which is the former Portcullis Asset Management that we acquired. It also owns our business in London. We will also set up an event business that will provide events across our platform. A very important event will take place in July, our Follow the Entrepreneur Investor Summit. Additionally, we also have a separate research and IP business. Our investment strategy is based on a concept we call ‘Ecosystem Economics’. One aim related to this is to establish an institute for Ecosystem Economics in Malta.
Can you tell us more about the concept of Ecosystem Economics?
We actually looked at digital platform companies in Silicon Valley and analysed why companies like Uber and Airbnb are so successful. We have established 12 factors that make up the business model of Ecosystem Economics. The most crucial aspect is building lifetime value per user. This means that these models are RPU-driven (Revenue Per User). Secondly, it is about operating as platforms. Thirdly, it is about using individual data for deep profiling. These businesses engage the individual in leveraging the infrastructure on the platform. These are just the most basic of the 12 factors that we have established. Essentially, Ecosystem Economics companies organise their business in a particular way that we call B2C2B (Business-to-Consumer-to-Business). This model has been codified into our digital playbook; our reinvention methodology can be applied by traditional businesses so that they grow into more successful businesses.
My advice is to forget the consultants and bring in the entrepreneurs.
How important is timing in this regard? Many entrepreneurs have good ideas, but only a select few become like Uber.
I think this is a very interesting question because many people do not think about timing, while I think about timing all the time. Timing is also important in a broader sense within the innovation framework cycles. The opportunity to invest today is profoundly different from what it was five years ago. Since the large corporations are so eager to buy disruptive technology in order to get into the future, it should be a better bet to invest in venture capital now than it used to be. My advice is to forget the consultants and bring in the entrepreneurs. Entrepreneurs have the insight, and timing is everything right now.
If you allow me to be the Devil’s advocate: Let’s imagine the development of B2C2B, sharing economies and blockchain further down the road. Is there not a risk that the one who charges the commission will become an illegitimate drain on the consumer and the service provider since they could very well organise the platform themselves without a third party involved in the transaction?
I totally agree. Regardless of what kind of business the large corporation is, they have a very short time-span with which to engage the challenge these days. The past five years we have seen a rise of new technologies that are completely up-ending the large corporations by making their business models obsolete. Those who are running large traditional businesses today should be very scared about what is going on because the B2C2B model is the future. If large corporations are only starting to change today, it is too late.
As an entrepreneur in this new environment, what is the biggest mistake one can commit?
The biggest mistake an entrepreneur can do is to overbuild. Many venture capitalists and entrepreneurs want to build something big and beautiful. They think they need €10 million to do this. However, the corporations that will eventually buy their start-up already have all this. In reality, entrepreneurs just need to listen to the market and to the customers.
Ariadne Capital is promoting the concept that 'David' and 'Goliath' must dance, meaning that corporations need to engage with entrepreneurs to find synergies.
You often talk about empowering individuals to leverage their infrastructure, how is the sharing economy possible for those people who do not yet have any assets to share in the first place?
This issue is right on spot, and it has occupied my thoughts a lot. I have been deeply inspired by the economist Hernando de Soto with regard to this issue. He studied what happened when Peru established property rights for farmers. Once people actually owned the farm, as opposed to just working on it, their behaviour changed to become entrepreneurial. We are trying to transpose this phenomenon to the digital world with our platform Entrepreneur Country. We established property rights for consumer data and build individual data into a financial asset. As people are test-piloting applications inside the platform, they are also creating wealth for themselves.
Finally, what do you think about the present dynamic of serial entrepreneurs, who launch start-up after start-up with the aim of getting acquired as quickly as possible?
It is important to focus on the earn-out model of the acquisition to keep the entrepreneur and the knowledge in the company after the acquisition. Corporations need to tie in the entrepreneur and cash him or her out with an earn-out running over some couple of years. This way they get the real benefit of the acquisition.
Julie Marie Meyer MBE is an American businesswoman, entrepreneur and author. She is the founder and CEO of Ariadne Capital, a venture capital firm, is a Managing Partner at the Ariadne Capital Entrepreneurs (ACE) Fund, Ariadne Ecosystem Economics™ Fund, and is the founder of EntrepreneurCountry. Meyer was the co-founder of the networking club First Tuesday (1998-2000)