European Technology Success Stories

Special Paper Special Paper

An EVCA High-Tech Committee Paper

The European Private Equity and Venture Capital Association (EVCA) exists to represent the European private equity sector.
With over 980 members throughout Europe, EVCA's many roles include providing information services for members,
creating networking opportunities, acting as a lobbying and campaigning organisation and working to promote the asset
class both within Europe and throughout the world. EVCA's activities cover the whole range of private equity; venture capital,
from seed and start-up to development capital; buyouts and buyins, and the flotation of private equity-backed companies.
 Technology Success Stories
This paper aims to present a selection of venture-backed European technology companies
and to explain not only their success, but the involvement of the venture capitalist
in helping the company grow to where it is today.

September 2002
Foreword
Foreword
EVCA is delighted to be publishing this third update to its
regular document, European Technology Success Stories.
With the recent turbulence experienced by the technology
markets, it is easy to forget that the best companies have con-
tinued to grow. While not immune to the effects of difficult
markets, well-managed technology businesses have shown
that they can survive and in many cases prosper in times of
adversity.
The aim of Technology Success Stories is to feature a selection
of venture-backed companies and illustrate the role that venture
capital investment played in their development. The company
profiles are based on interviews with both the entrepreneurs
and the venture capitalist(s) involved in each business.
Reading the company profiles, it is striking how often entre-
preneurs consider the primary contribution of the venture
capital investors to be other than financial. Assistance with
recruitment, financial planning, strategic partnering, and com-
plex negotiations, are all mentioned as important contributions
made by venture capitalists.
The European companies profiled in this publication operate
within a broad range of industries, illustrate a breadth of
entrepreneurial characteristics and management styles and
cover a pan-European geographic spread. These businesses
are a testimony to the breadth of opportunity available to
European entrepreneurs today.
Max Burger-Calderon,
EVCA Chairman
2
Entrepreneurs are drivers of European innovation, of job
creation and of economic development. Entrepreneurship
should be advocated and supported, not only by the venture
capital community, but by the entire business world.
While Europe continues to develop the service infrastructure
on which to build entrepreneurial companies, there remains
much to be done:
■ The bureaucracy associated with creating and managing a
small business needs to be reduced
■ The tax treatment of stock options and capital gains will
require continued reform so that adequate incentives exist
for entrepreneurs and their investors
■ Labour laws need to take into account the needs and
limitations of small businesses
The strong record of European technology companies should
help us make progress on these and other issues.
We would like to thank the members of the EVCA’s High-Tech
committee who were involved in this project; Jean-Bernard
Schmidt, Sofinnova Partners and Andy Allars, Prelude Tech-
nology Investments who were involved in the review of the
company profiles; and Callie Leamy, a consultant to the EVCA,
who carried out the research and writing of this publication.
Michael Elias,
Chairman EVCA High-Tech Committee
Contents
Contents

Foreword 2

aBAXX TECHNOLOGY AG 5

ACTELION PHARMACEUTICALS LTD 7

DARTFISH 9

DETECTION TECHNOLOGY OY 11

GENMAB A/S 13

GIGA A/S 15

IMMUNO-DESIGNED MOLECULES (IDM) SA 17

LASERBIT 19

MORPHOCHEM AG 21

NO WIRES NEEDED 23

NOVUSPHARMA S.P.A 25

TISCALI S.P.A 27

Updated Stories 29

DR SOLOMON’S GROUP PLC 31

FLOMERICS GROUP PLC 33

INNOGENETICS NV 35

MACONOMY AS 37

SCM MICROSYSTEMS INC. 39

SEAGULL HOLDING NV 41

SOITEC 43

Acknowledgements 45

3
4
abaXX Technology AG
abaXX Technology AG
■ Activity: software solutions for on-line e-CRM and
process portals
■ Country: Germany
■ Venture capital backers: 3i Group Plc, Accenture,
Earlybird, General Atlantic Partners
■ Transaction summary: a total of €38.5 million raised
in three financing rounds
abaXX Technology AG was founded in March 1999 by Dr.
Jürgen Enders, Thorsten Schäfer and Dirk Matzat. All three
were managers at the one-time Neuer Markt software star,
Brokat, before they terminated their employment contracts to
start abaXX.
The company develops components for online relationship
management software applications to be used in e-CRM and
process portals. The applications are built to customer speci-
fications by abaXX, working in close co-operation with leading
technology and consulting companies such as Accenture,
BEAsystems, IBM and SUN Microsystems. Since 2001, abaXX
has partnered with Siebel Systems Inc, the world’s leading
provider of e-business applications software, to facilitate the
integration of abaXX’s e-business suite into Siebel’s e-business
applications.
Together with the management,
abaXX’s components allow for the
the venture capital investors completely reviewed
development of fully customised
abaXX’s business plan.
and integrated functionality. ‘Today
Java 2 EE software components are
used widely,’ says Christian Siegele of 3i, explaining abaXX’s
innovative edge. ‘But when abaXX first started, use of these
components was completely new. And abaXX boasts the
richest and largest number of Java 2 EE software components.’
In addition to components, abaXX also provides clients with
training, as well as professional consulting services to help
them develop successful, highly-targeted solutions.
Many of abaXX’s customers are leaders in the banking sector,
such as Crédit Suisse, Dekka and Dresdner Bank, but abaXX’s
components can be used in applications that serve a wide
variety of other industries as well. abaXX’s client list spans
many sectors and includes BertelsmannSpringer, Logis Market,
which is Spain’s largest manufacturer of storage products,
and tech2B, a direct provider of computers.
The company’s technology has won it several awards and
nominations. Most recently it won the CyberOne award for
its innovative solutions and was nominated a finalist in the
Deutscher Gründerpreis (annual competition for entrepre-
neurs in Germany) on the basis of its extraordinary growth
and potential. Tornado Insider has also named the company
twice - in 2001 and again in 2002 - as one of the 100 hottest
high-tech companies in Europe.
abaXX’s products have been well received since its inception.
Within nine months of its launch the company had already
recorded sales of €1.9 million, and this figure soared to €15
million for 2000 before doubling again in 2001. Within two
years of establishing the company, abaXX’s management was
already celebrating its first profitable quarter in Q2 2001.
Employee numbers have jumped as well - from the three
founders in 1999 to 150 in 2002. By the height of the
dot.com boom in 2000, the company already had more than
200 employees spread out in offices throughout Germany
and Europe.
The Venture Capital Investment
abaXX’s initial €2.5 million in funding came from 3i, Earlybird
and the German federal government through its Technologie-
Beteiligungsgesellschaft (TBG).
According to Siegele, 3i invested
seed capital because ‘the company’s
vision was compelling and the 3i
specialists liked the dynamic and
growth potential of that particular
e-commerce sector.’ The second round of financing came in
2000, with the lead investor, General Atlantic, and Accenture
injecting €18 million.
Since its investment in the company, General Atlantic Partners
has helped recruit former head of Oracle Europe Loek van
den Boog as abaXX’s chairman of the board. Offering valuable
assistance to the young management team, Mr van den Boog
provides consistent input on the company’s sales strategy and
overall direction. General Atlantic Partners has aided abaXX’s
growth in a variety of other ways as well, including assisting
abaXX as it moved into new markets in Europe and the US. ➞
5
The investors intended to exit the company through an IPO
scheduled for December 2000, but due to market conditions
abaXX was forced to pull the offering just weeks before its
planned launch.

At the news of the cancelled IPO the venture capital backers

rallied around abaXX, and General Atlantic Partners drove the
third financing round in the final weeks of December 2000
in order to ensure that the company had enough funds to
keep it going. In just three weeks from the announcement of
the pulled IPO, abaXX received another €18 million from its
existing investors. ‘abaXX’s management were very encour-
aged by our confidence in them, shown by the amount of
capital we raised and the speed with which it was done,’
recalls Siegele. Since then no additional money has been
needed by the company.

The venture capital companies also helped abaXX’s mana-

gement team develop a restructuring plan following the pulled
IPO. ‘In 2000, abaXX was growing tremendously. Although
it had a clear plan for revenues, it lacked one for profits.
Together with the management, the venture capital investors
completely reviewed abaXX’s business plan,’ relates Siegele.
The goal of the new plan was for the company to take measures
enabling it to become profitable within 6 months and to cut
costs. The implementation of the plan was successful, and, as
mentioned above, abaXX became profitable for the first time
in the second quarter of 2001 - little over a year after the
implementation of the new plan. ‘This was due largely to
management’s strong leadership and their execution of the
plan,’ adds Siegele. Cost-cutting measures included the
closure of abaXX’s foreign offices, except in Switzerland, and
a reduction in staff.

With the company’s new plan bringing about the desired

results - lower costs and increased revenues - Siegele believes
that abaXX will be able to tap the capital markets success-
fully once they fully recover from the current cautious period.
Until then, abaXX will continue what it does best - developing
innovative solutions for online customer relationship mana-
gement and process portals.

6
Actelion Pharmaceuticals Ltd
Actelion Pharmaceuticals Ltd
■ Activity: discovery, development and marketing of
pharmaceutical compounds related to the vascular
endothelium
■ Country: Switzerland
■ Venture capital backers: 3i, Atlas Venture, Genevest,
Sofinnova, TVM and Wellington Partners
■ Transaction summary: a total of CHF 66 million
(€34.6 million), including CHF10 million (€6.3 million)
in a bank credit facility, raised in two rounds of financing
■ Exit: IPO on the Swiss New Market Exchange on
6 April 2000
At the end of 1997 a group of 4 F. Hoffmann-La Roche employees
- Jean-Paul Clozel, Walter Fischli, Thomas Widmann and Martine
Clozel - decided to leave the company and set up their own
business. They were immediately joined by André J. Mueller, a
former CFO of Biogen. Their plan was to commercialise their work
on the endothelin, a substance secreted from the inner lining of
the blood vessel wall (called the endothelium), which causes
severe constriction of blood vessels. The group’s exploration of
endothelin receptor antagonists introduced a novel approach to
new treatments, especially for the cardiovascular system.
The five colleagues decided to call
According to Actelion’s management,
their new business Actelion. Shortly
the backing of this syndicate helped it
after the formation of Actelion, F.
to attract key talent into the company and
Hoffmann-La Roche granted it an
exclusive license for the clinical
to generate collaborations
development and commercialisation
of an intravenous endothelin antagonist. A few months later,
Actelion gained a second exclusive license from Hoffman-La
Roche - this time for the development and commercialisation of
bosentan. Both were compounds that the founders had worked
on while with the big pharma company.
Today, Actelion specialises in the development and commer-
cialisation of drugs related to the endothelium. This focus allows
plenty of scope, since the vascular endothelium alone provides an
important source of molecular targets for drug discovery, leading
to the development of drugs to treat cardiovascular disease,
the central nervous system (CNS), cancer and others. Tracleer™,
Actelion’s first drug on the market, was developed and launched
in record time - within three and a half years.
‘Actelion is one of the few companies from continental Europe
that have been able to register a drug with the FDA,’ remarks
Joël Besse, Senior Principal at Atlas Venture, one of the initial
investors in Actelion. 'It is usually only the older established
pharma companies that get through. Actelion is a small five year
old life sciences company and already it has a drug registered
not only in the US but also in key markets worldwide. That makes
it very successful.' Tracleer™ has been registered and launched
in the US, the EU, Canada and Switzerland. Arol Tracleer™ treats
pulmonary arterial hypertension, and is priced significantly
below intravenous treatment and is easy to use. It is also the
only endothelin receptor antagonist to have been approved for
marketing.
Actelion has discovered a number of other novel compounds
that are in various stages of development, including possible tar-
gets for treatment of cardiovascular disease, cancer, eating and
sleeping disorders and Alzheimer’s. ‘This company wants to do
new things,’ says Besse. ‘It wants to create new novel drugs.’
The impressive growth in Actelion’s product line is matched by
its expansion. In five years it has grown from the five founding
members in Allschwil/Basel to almost 500 people located through-
out the world - in Australia, Canada, France, Germany, Greece,
Italy, Japan, Spain, Switzerland, United Kingdom, Sweden,
the Netherlands, Austria, Brazil and
the United States. The company’s
revenues, due largely to cooperation
agreements, expanded almost 1000
per cent between 1999 and 2000,
on a corporate level. and in 2001 they more than doubled
to CHF64.1 million (€43.3 million).
It is expecting revenues of above CHF100 million (€68.3 million)
for 2002 following Tracleer’s availability in key markets worldwide.
Actelion’s strategic partners include Genetech and Johnson &
Johnson.
The Venture Capital Investment
In April 1998, Actelion received an initial investment of CHF 18
million (€10.9 million) from an international syndicate of venture
capital companies. They included Atlas Venture, Sofinnova, 3i,
TVM and Genevest. The funding was used to build the company’s
laboratories and its external R&D programmes. ➞
7
According to Actelion’s management, the backing of this syn- Actelion’s venture capital investors received a handsome reward
dicate helped it to attract key talent into the company and to for their support of the company. In April 2000, Actelion raised
generate collaborations on a corporate level. close to CHF 250 million (€764.5 million) through its IPO
on the Swiss New Market Stock Exchange. At the time, the
As a result of its acquiring the license for bosentan from 19 times oversubscribed offering was believed to be one of
F. Hoffmann-La Roche, Actelion held a second round of Europe’s biggest. ‘The VCs all got really good returns on their
financing in March 1999. In this round, Actelion raised CHF investments,’ says Besse. ‘Along with the amount raised, the
48 million (€30 million), comprised of CHF38 million VC backers benefited because Actelion took only a short
(€23.7 million) in equity, plus a bank credit facility. At the amount of time from initial financing to IPO.’
time, the funding represented one of the largest amounts ever
obtained by a new biotech company in such a short period. In September 2002, Actelion’s listing moved from the growth-
TVM led the round. The funds also secured the continuous driven Swiss New Market to the SWX’s main market to widen
development of the company’s two clinical candidates. its investor base. The move comes as one-year (September
2001 – September 2002) market data shows Actelion’s shares
Jean-Paul Clozel, Actelion’s CEO, outperforming both markets for
credits his company’s venture much of the time, with gains in the
Jean-Paul Clozel, Actelion’s CEO,
capital backers with playing a key first half of 2002. With sales of
credits his company’s venture capital backers
role in its development. ‘Not so Tracleer™ exceeding forecasts for
with playing a key role in its development.
much by providing the money,’ the second quarter of 2002, Actelion
‘Not so much by providing the money,’
he explains, ‘more importantly, is on course to register sales of over
Sofinnova and Atlas Venture told
he explains. CHF100 million (€64 million) of
us how much money we would the drug this year. Tracleer™ is set
need and how to structure the financing. They made sure for launch throughout the EU in late 2002, with Israel,
that we would have enough to see us through and to follow Australia and Japan not too far behind. Judging by sales fore-
our business plan, develop our drug candidates and prepare casts for Tracleer™, and with the company’s continuing
for the IPO. This allowed us to continue working without research into new drugs, shareholders may expect the good
being forced to sell the rights to our drugs.’ Sofinnova and returns to continue.
Atlas Venture, adds Jean-Paul, also helped bring other
investors into the syndicate.

8
Dartfish
Dartfish
■ Activity: advanced digital image processing
■ Country: Switzerland
■ Venture capital backers: CIMA Corporate Investment
and Management Affentranger Holding SA, Initiative
Capital (BCV), Intel Capital, Nomura (Terra Firma),
Renaissance, Venture Partners AG and private investors
■ Transaction summary: CHF 16.7 million (€11.8 million)
in three rounds of venture capital financing
Dartfish began as an idea. In 1997, wanting to be able to
compare his students' ski performances, ski instructor and
software engineer Serge Ayer began working on an advanced
image processing technology that would allow him to do just
that. Serge developed the software program while employed
at the Swiss Federal Institute of Technology. In late 1998 Serge
and four other co-founders, including his brother Jean-Marie
Ayer, the company’s CEO, founded InMotion Technologies,
later renamed Dartfish, to commercially develop digital
imaging applications.
SimulCam, Dartfish’s initial product,
made its international debut during
All of our venture capital investors
the World Skiing Championships in
have ensured proper governance,
Switzerland in 1999. The program
and they oversee our activities and plans
allows for the comparison of two
to make sure that the business is run well -
athletes by superimposing one over
the other on the same background.
and in the right direction. They ask the questions
Building on this technology, the that we should
company has launched a variety of
additional products, including DartTrainer, which allows for
the breakdown of athletic performances, and StroMotion, which
reveals the evolution of an athlete’s movement by compound-
ing images in a frame-by-frame sequences. Dartfish’s unique
technology earned it the top prize in the competition for
Europe’s top IT innovator in September 1999.
Able to create a new dimension in the sport experience,
Dartfish initially targeted broadcasters and sports associa-
tions, clubs and teams with its applications. The company’s
products have been used by a wide variety of US and
European broadcasting companies for a number of sporting
events, including the 2002 Winter Olympics and the 2000
Sydney Olympics. Customers for its DartTrainer solutions
include famous athletes, trainers and teams.
Today the company’s technologies and know-how are widely
recognised in the sports world for exclusive televised broad-
cast footage, interactive internet content and breakthrough
sport training applications.
The manufacturing industry is another market that Dartfish
is breaking into with its products. Jean-Marie Ayer explains:
‘In industry the multi-media approach is catching up, and
Dartfish is enabling companies to use these developments to
their advantage. For example if a company wants to document
the usage of a machine, it used to be done in writing, but
today Dartfish’s products make cataloguing the process more
interactive.’
Based in Fribourg, Switzerland Dartfish has grown from its
five founders to around 50 employees, with a subsidiary in
the United States and two franchises in Seoul and Australia.
Dartfish’s sales have also grown 900 per cent since its first full
year in operation - from CHF400,000 (€249,000) in 1999 to
CHF4 million (€2.7 million) in 2001. This year the company’s
management expects it to pull in between CHF5 (€3.4) and
CHF6 (€4.1) million in sales. Jean-Marie adds: ‘You must keep
in mind that during our first few years we spent most of our
energy looking for our niche. Now
we are ready to scale up production
and produce larger volumes.’
The Venture Capital
Investment
be asking ourselves.
Dartfish’s founders received their
initial seed money from a local development agency. The agency
put up CHF700,000 (€435,400) in repayable financing, which
was provided by a regional fund supported by Swiss companies
active in the area. The founders added CHF500,000 (€311,000)
of their own money to the financing they received.
Nine months later, in need of funding to continue its activities,
Dartfish raised CHF2.2 million (€1.4 million) from Venture
Partners AG together with some private investors. Some of this
money also went to the repayment of the financing received
from the local agency. A second round of financing in October
2000 brought in CHF11.5 million (€7.6 million) from Intel
Capital, Nomura International and Venture Partners AG. ➞
9
Dartfish raised CHF3 million (€2.8 million) in a third round of
financing in July 2002. The extra money enables Dartfish to
continue building up its sales force and distribution networks.

According to Jean-Marie, Intel has provided value in addition

to financing. ‘It has helped in our general development and
marketing efforts. We benefit from the support of such a large
company. Our association with them gives us heightened
visibility,’ says Jean-Marie.

Dartfish has also profited from having Nomura (Terra Firma) and
Venture Partners AG in its syndicate. Nomura, says Jean-Marie,
provides strategic high-level contacts, and Venture Partners AG
(the lead investor) has assisted Dartfish starting from a very early
stage by providing a comprehensive scope of business support
and strategic guidance. And of course, adds Ayer, ‘All of our
venture capital investors have ensured proper governance,
and they oversee our activities and plans to make sure that
the business is run well - and in the right direction. They ask
the questions that we should be asking ourselves.’

10
Detection Technology Oy
Detection Technology Oy
■ Activity: production of silicon-based radiation
sensors and diodes
■ Country: Finland
■ Venture capital backers: 3i Group Plc, Start Fund
of Kera Oy
■ Transaction summary: €5.9 million raised in two
rounds of venture capital financing
The story of Detection Technology Oy began at the European
Organisation for Nuclear Research (CERN), Switzerland. Over
a number of years, several hundred million euros were poured
into CERN to fund the development of high-performance
sensors for use in physics and space research. Detection
Technology's founders worked on this technology at CERN
in the late 1980s and early 1990s, until deciding to strike out
on their own in 1991. Their objective in doing so was clear:
to use the sensor technology they had learned about at CERN
for commercial purposes.
As a result, Detection Technology was opened for operation
in 1992. For its first four years of existence, the company
focused mainly on the production of silicon strip detectors for
customers involved in various areas of science. ‘After completing
a number of market studies, we decided in 1994 to change
our focus from mainly scientific applications of our technology
to medical and industrial uses for it,’ explains Matti Palatsi,
Chief Financial Officer of Detection Technology.
Detection Technology began its
But when the company decided to change
international expansion in 1993
its business model in 1998 and pursue
with a co-operation agreement with
an ambitious growth plan, management… looked
Tsinghua University in Beijing, and
later established a subsidiary there
to venture capital backers for assistance.
to handle sales, marketing and soft-
ware development. In 2000, Detection Technology added a
silicon wafer production line in Hong Kong and a sales office
in Boston. Plans are currently under way to expand business
activities in China. The company currently employs 44 people.
Jarkko Virtanen of 3i and member of Detection Technology’s
board explains the company’s strategy: ‘The whole industry
seems to be moving into Shanghai. And China, as well as Asia
as a whole, are interesting markets.’ The focus on China is a
result of the country’s large market for sensors and detection
modules. In 2001 about 15 per cent of Detection Technology's
sales were made in Asia, and it expects that number to
increase rapidly to 20 to 25 per cent of sales this year.
Today Detection Technology, based in Micropolis in Ii, Finland
- the company’s design headquarters - manufactures advanced
light and radiation sensors for a range of uses. The company
is the technology leader in these main focus areas. X-Scan -
the company’s low energy x-ray scanning products, used for
example in food quality inspection and truck and airport
scanners, and CT, computer topography detector products
used for medical imaging, are Detection Technology’s two
main product families. Ninety-five per cent of the company’s
products are exported to markets throughout the world.
Detection Technology is also the fastest growing company in
the high performance light and radiation detector sector.
Demand for its products has spurred on this growth. ‘From
1998 to 2001 the average growth rate in sales was about 60
per cent, and from 1999 to 2000, it was about 70 per cent,’
says Palatsi. Sales for 2001 came in at €4.5 million, marking a
rise in sales of 766 per cent since the company began targeting
commercial users for its detectors in 1994.
The Venture Capital Investment
Because it has been profitable since its inception, Detection
Technology had always been able to fund its operations through
its sales revenues. But when the company decided to change its
business model in 1998 and pursue
an ambitious growth plan, manage-
ment knew they would need more
than just the profits from sales to
fund this. That is when they looked
to venture capital backers for assis-
tance. ‘We had some other offers for
funding, but we chose the Start Fund of Kera Oy (SFK), because
it seemed to be the most active company and we believed it
would add the most value to our business,’ explains Palatsi.
The Start Fund of Kera Oy, managed by SFK Finance and later
acquired by 3i in 2000, was the only initial venture capital
investor in Detection Technology. In that first round of financing,
Detection Technology raised €0.9 million in equity and loans.
The second round of financing, completed in August 2001,
brought in €5 million in both equity and convertible loans. ➞
11
This second round was necessary to safeguard the growth of
the company and to secure its foreign operations - including
a planned expansion into Central Europe and the US.
Detection Technology plans an IPO in 2004 or 2005.

‘3i has been a valuable help for Detection Technology. It has

provided contacts, assistance with our business plans and has
supplied us with market studies to help us grow the business,’
says Palatsi. ‘Also, 3i has a lot of contact networks in Asia and
China where the main centres of production for silicon wafers
are - this has been a big help.’ Virtanen, adds: ‘The value added
by 3i’s worldwide organisation will enable the company to
build-on and strengthen its existing international network.’

12
Genmab A/S
Genmab A/S
■ Activity: creates and develops fully human antibodies
using transgenic mouse technology
■ Country: Denmark
■ Venture capital backers: Apax Partners, BankInvest
Group, Dansk Erhvervsinvestering A/S, Index
Ventures, Lombard Odier, Lønmodtagernes
Dyrtidsfond A/S and Medarex
■ Transaction summary: approximately DKK 407 million
(€54.6 million) in 4 rounds of venture capital financing
■ Exit: IPO on the Copenhagen Stock Exchange and
the Neuer Markt in Germany in October 2000
In 1998 Dr Lisa Drakeman, then the Senior Vice President and
Head of Business Development for US biopharmaceutical com-
pany Medarex, met representatives from BankInvest, including
Jesper Zeuthen, at a conference in Copenhagen. At the time
Medarex was interested in seeking a collaboration concerning
development of products derived from its pioneering transgenic
mouse technology. The new European biotech company Genmab
based in Copenhagen, Denmark was launched as a result of that
meeting and subsequent negotiations between Medarex and
BankInvest early the following year.
Medarex’s transgenic mouse technology is based on transgenic
mice that have had their antibody-making genes removed
and replaced by human antibody encoding genetic material
making it possible for these mice to produce fully human
antibodies. This groundbreaking technology avoids the need
for humanization of antibodies which can be a lengthy and
expensive process, and it also eliminates the possibility of
any immunological reaction to the antibodies since they are
fully human. Genmab has obtained licences through
Medarex for the technology and for the use of three of these
human antibody-producing mice. It is currently the HuMAb-
Mouse® technology that drives the company’s drug discovery
and development process.
Genmab develops antibodies to novel disease targets and
also produces antibodies to other targets where a human
antibody could provide an improved product. Using its
mouse technology, Genmab has developed a rich product
pipeline in a very short space of time. 'We have gone from
nothing to several products within three years,' says Rachel
Gravesen, Vice President of Public and Investor Relations.
Genmab currently has three products in clinical trials, one of
which is already in phase III trials in the US. These current
products are for the treatment of rheumatoid arthritis,
psoriasis, cancer and inflammation. Four other products are
currently in the pre-clinical phase, but should enter clinical
development soon.
When it was founded in 1999,
Genmab employed only three people. By 2001 that number
had jumped to 111, and it is expected to rise again
to at least 180 by the end of 2002.
The company also collaborates with a large number of other
biotech and pharmaceutical companies to develop or co-
develop antibody products. Genmab’s partners include
Medarex, Immunex Corporation, Oxford GlycoSciences,
Sequenom and Roche. Roche´s expansion of its collaboration
with Genmab which was announced in the spring of 2002
included a €21 million equity investment in Genmab. All of
these collaboration agreements provide Genmab with guar-
antees of milestone payments, royalties and license fees.
When it was founded in 1999, Genmab employed only three
people. By 2001 that number had jumped to 111, and it is
expected to rise again to at least 180 by the end of 2002. The
addition of facilities in the Netherlands and the United States
in 2000 has also contributed to Genmab's growth.
The Venture Capital Investment
The initial venture capital investment of DKK 35.4 million
(€4.7 million) came from BankInvest, Lønmodtagernes
Dyrtidsfond and A/S Dansk Erhvervsinvestering. At the same
time, Medarex granted Genmab a limited number of licenses
also worth DKK 35.4 million (€4.7 million) to develop and
commercialise a portfolio of fully human antibody products
derived from its HuMAb-Mouse® technology.
In May 1999 and February 2000 Genmab received additional
funding from the BankInvest Group and its co-investors
totalling approximately DKK 49 million (€6.6 million) in cash,
plus a number of fully-paid licences and an unlimited number
of royalty-bearing licenses from Medarex which were valued
at approximately DKK 42.8 million (€5.8 million). ➞
13
In June 2000, Genmab raised an unprecedented sum of venture In a little more than a year and a half from its inception,
capital funding - approximately DKK 322.6 million (€43.3 Genmab successfully completed an IPO. In October 2000
million). At the time this was considered the largest funding the company listed simultaneously on the Copenhagen Stock
round to date for a European biotech. This financing round Exchange and on the Neuer Markt in Germany, raising
was led by Index Ventures of Geneva and included Apax approximately DKK 1.6 billion (€214 million). The venture
Europe and Lombard Odier Immunology Fund, as well as capital backers then exited Genmab in October 2001,
Genmab’s existing investors. although some still retain a small percentage in the company.
In July 2002, Genmab applied to delist its shares from the
Neuer Markt. According to Lisa N. Drakeman, Genmab’s cur-
From the very beginning, BankInvest’s involvement
rent CEO, this was a rational decision, as more than 95 per
has been crucial to Genmab. ‘BankInvest helped create
cent of the trading in the company’s stock has taken place on
this company,’ says Zeuthen proudly.
the Copenhagen Stock Exchange since its IPO, and she says:
‘By eliminating the duplication in financial reporting that
From the very beginning, BankInvest’s involvement has been comes with a double listing, Genmab will gain considerable
crucial to Genmab. ‘BankInvest helped create this company,’ cost savings.’
says Zeuthen proudly. In addition to assisting Medarex in
hammering out the company’s structure and then launching it,
In addition to assisting Medarex in hammering out
BankInvest also helped recruit Genmab’s first Board of
the company’s structure and then launching it,
Directors, its Scientific Advisory Board and key members of
BankInvest also helped recruit Genmab’s first Board of
Genmab’s management team. BankInvest has also con-
Directors, its Scientific Advisory Board and key members of
tributed significantly to the company’s development through
its participation on the board and Zeuthen’s position as a
Genmab’s management team.
Member of the Board since Genmab’s inception and
Chairman of the Board since 2000. Today Genmab is Europe’s fifth largest biotech company and
presently ranks among the world’s top 50 biotech companies
BankInvest has also opened doors for Genmab by helping it by market capitalisation.
make contacts in the Danish, as well as the European medical
community, which has made it possible for the company to
conduct its clinical trials quicker and more efficiently than
most other biotech companies. And partially on the strength of
BankInvest’s participation in Genmab, the company was able to
pull in Apax and Index Ventures in subsequent financing rounds.

14
Giga A/S
Giga A/S
■ Activity: develops and manufactures advanced
high-speed communication chips
■ Country: Denmark
■ Venture capital backers: Dansk Erhvervsinvestering
A/S, Dansk Kapitalanlæg A/S, Lønmodtagernes
Dyrtidsfond and NKT Holding A/S
■ Transaction summary: US$2 million in several
rounds of venture capital financing (€2 million –
conversion as of 5 September 2002)
■ Exit: trade sale to Intel in 2000 for US$1.25 billion
(€1.3 billion)
In 1988 NKT Holding A/S, an industrial player with a history
in telecommunications, launched GIGA A/S as a strategic part
of its portfolio to produce integrated high-speed components.
NKT A/S choose to start GIGA A/S as an independent company,
rather than a department of one of the other companies in the
group, because GIGA would only be of use to NKT if it could
gather substantial know-how from many designs. And this
would not have been possible if GIGA were an internal depart-
ment. With seed financing from Lønmodtagernes Dyrtidsfond,
Dansk Kapitalanlæg and Dansk Erhvervsinvestering, GIGA was
established as a partly-owned subsidiary of NKT Holdings A/S.
In its first seven years in free com-
petition on the open market, GIGA
But the turning-point for the company came
produced more than 100 designs.
when the investors recruited Helmer,
and as GIGA was a small company, the venture
The military market was the main
capital backers provided access to vital support
initial target for GIGA’s products,
until demand in that sector fell
in accounting and legal matters.
sharply in the early 1990s. Facing
mounting losses and suddenly needing a new market for its
products, GIGA’s future then seemed shaky at best. That is
when NKT brought in Finn Helmer, a former Texas Instruments
executive, to turn GIGA around. He joined as GIGA’s managing
director in early 1992.
One of Helmer’s first actions was to borrow US$1 million
(ECU 1.3 million) from the owners. 'I was told that it was the
last money the company would ever get,’ recalls Helmer.
Mostly the loan went to paying off existing debts and offset
losses, and Helmer was left with around US$400,000 (ECU
515,000) to fund a restructuring of the company.
His next step was to drum up new orders and more customers.
With its main market contracting, the new customers GIGA
was looking for had to come from another sector. ‘We decided
that we needed to manufacture products that required a sub-
stantial amount of know-how, but where the volume of such
products on the market was low, meaning that the price
would be quite high. Providing products to the telecoms
industry seemed to be a logical place to start,’ explains
Helmer. The strategy was successful, and GIGA was able to
repay the emergency loan within two years and remain
entirely self-financing afterwards.
GIGA specialised in the design and manufacture of advanced
high-speed communications chips used in the optical net-
working and communications products that direct traffic across
the internet and corporate networks. It became a leading
supplier of 2.5 gigabits-per second and 10 gigabits-per-second
products to customers from the telecommunications and data
communications industries. GIGA held a prominent position
in these markets and from 1997 was the only company in the
world that could build 10 gigabit standard devices in volume.
GIGA remained the only high-volume supplier of these
solutions up until its sale in 2000. Companies such as Cisco
Systems, Nortel Networks and Lucent Technologies were
typical targets for GIGA’s components.
The year that Helmer took over
GIGA, its sales rocketed to US$2
million (ECU 2.6 million). GIGA’s
revenues then doubled the following
year, and by 1999 its turnover had
reached US$27 million (€26.9
million). Helmer attributes much of
GIGA’s success to the people working
there - ‘We had extremely clever people working for us on the
tech side.’ As demand for its products took off, GIGA grew
from just 7 people based at the company’s Copenhagen
headquarters to 160 in 6 countries by March 2000.
The Venture Capital Investment
Within its first five years of operation, GIGA received a total
of US$2 million (€2 million conversion as of 5 September
2002) in several rounds of financing from its venture capital
backers, Lønmodtagernes Dyrtidsfond, Dansk Kapitalanlæg
and Dansk Erhvervsinvestering. ➞
15
But the turning-point for the company came when the investors
recruited Helmer, and as GIGA was a small company, the
venture capital backers provided access to vital support in
accounting and legal matters.

For the most part, Helmer preferred the venture capital backers
to let him manage the company with a relatively free hand
and due to Helmer’s proven experience, this was the best
path in this situation. ‘We made an agreement that if I met
the forecasts and annual plans, the venture capital investors
would not get involved in the operation of the company,’
Helmer says. ‘It is important to be free to take your own
decisions, as long as you keep to your commitments and
keep your revenues and profits in line.’ Helmer honoured his
side of the bargain, and GIGA’s management was left to run
the company as it saw fit.

By 1999 GIGA’s management realised that in order to get

ahead in the market the company would have to beef up its
resources and expand even more rapidly. They believed this
could only be achieved through the takeover of another
company, an IPO or a sale. The company presented these
options to the board, which decided to go for a sale, and a
closed auction for GIGA began in Autumn 1999. Around the
same time the market for 10 gigabit products sky-rocketed,
significantly increasing GIGA’s market value over the span of a
few months. ‘At the beginning of 1999 we were receiving bids
for US$40 million (€35 million), but by the end of the year we
had several offers for around US$1.2 billion (€1.2 billion),’
says Helmer. In March 2000 Intel agreed to buy GIGA for
US$1.25 billion (€1.3 billion).

16
IDM
IDM (Immuno-Designed Molecules)

technology have been shown to be less toxic than many

■ Activity: development and production of other forms of cancer treatment. Using the technology, IDM
cell therapy drugs developed two new families of immunotherapeutic agents
■ Country: France, Canada, USA called Cell Drugs™, which either kill tumours or act as
■ Venture capital backers: Alta Partners, Apax ‘cancer vaccines’, fighting disease by stimulating an immune
Partners, Atlas Venture, AXA Private Equity, Banexi, response in the patient. IDM currently has one of its products
Bank Vontobel, Biotechnology Turnaround Fund, in phase III trials and four in phase II.
BNP, Caisse de Pensions du Cern, CDC Innovation
Partners, Clal Biotechnology Industries, Compagnie Since 1993 IDM has grown from a one-man start-up in Paris to
Lebon, IMH, Medarex, Musuri, Paribas, Pechel 117 staff in France and in representative offices in Canada and
Industries and Sofinnova the US. The company has also forged several strong partner-
■ Transaction summary: approximately €66 million ships both with big pharmaceutical companies and biotech
in seed money, further venture capital financing firms. IDM’s most recent alliance agreement - with Sanofi-
rounds and a private placement Synthélabo - announced in February 2002, is thought to be
one of the largest deals ever negotiated by a European
biotech. Under the 10-year agreement Sanofi pledged €616
million in advance and milestone payments to IDM for rights
Jean-Loup Romet-Lemonne founded IDM SA in 1993. ‘It was a to ten of IDM’s drugs during the first five years, and two per
difficult area to go into because the trend at the time was to year for another five years. IDM also has collaboration
open biotechs that focused on gene therapy,’ recalls Romet- agreements with Medarex, Oxford BioMedica and Stedim.
Lemonne. ‘But I always wanted to work in immunology and
develop compounds that help cells work together.’ Romet-
Lemonne believed that the effectiveness of therapeutic drugs The Venture Capital Investment
could be increased if more were known about the interaction
of cells. At first, Romet-Lemonne ran into some difficulties when looking
for seed money for IDM. He recalls: ‘No-one wanted to invest
From the time IDM was established, it took three more years in early stage biotech companies in France in 1993, because
for cell therapy research to take off world-wide. 1996 saw there were few exit possibilities - the Nouveau Marché was not
a 322 per cent increase - up to US$65.8 million (ECU 81.8 around then.’ He finally found funding outside of France -
million) - in world-wide revenues for Musuri, a family-owned private
the cell therapy industry over the equity fund in Spain, and American
Since 1993 IDM has grown from a one-man
previous year. ‘We were pioneers life sciences company Medarex
start-up in Paris to 117 staff in France and
in this field,’ says Romet-Lemonne together invested FF3 million
in representative offices in Canada and the US.
proudly, ‘It was only at the end of (€457,000 – conversion as of 5
The company has also forged several strong
1996 that the scientific community September 2002) in IDM in 1993.
really began moving in the direction
partnerships both with big pharmaceutical
of cell therapy. In the beginning we companies and biotech firms. Two years later in March 1995,
were swimming against the scientific Sofinnova invested FF4 million
tide in trying to prove that monocytes - mature white blood (€610,000 – conversion as of 5 September 2002) in IDM.
cells - could produce these useful cells to fight disease.’ And once the market for cell therapy took off in 1996, it
became easier for IDM to find backers. In early 1997 Apax
The main target of IDM’s technology is cancer, and its pro- Partners, Atlas Venture, Banexi, CDC Innovation and
prietary technology is based around the extraction and culturing Sofinnova invested FF37 million (ECU 5.6 million) in a
of monocytes. The monocytes are then treated with a cytokine, financing round, and 18 months later IDM raised another
which enhances their ability to react with diseased cells, and €16 million in a private placement. ➞
re-injected into the body. This allows for greater control over
the disease treatment process, and products derived from this

17
Participants in the placement included IDM’s existing
investors, as well as AXA, Bank Vontobel, BNP, Caisse de
Pensions du Cern, Compagnie Lebon, IMH, Paribas and Pechel
Industries. Through its latest financing round in November
2000, IDM raised €48.8 million with participation from Clal
Biotechnology Industries, Alta Partners, Biotechnology
Turnaround Fund and Medarex.

According to Romet-Lemonne, it was the lead investor,

Sofinnova in particular that provided IDM with valuable
assistance early on. ‘The people at Sofinnova helped us structure
the company and gain access to important contacts,’ he says.
Sofinnova introduced Jean-Pierre Abastado, who became IDM’s
vice president of scientific affairs, to IDM. Romet-Lemonne
recalls: ‘I got a phone call from someone at Sofinnova who
had just had dinner with someone who was leaving the Pasteur
Institute. I spoke to that person right away and he joined us
soon after.’ Sofinnova also set up an initial appointment
between Romet-Lemonne and the head of Sanofi several years
ago. ‘Eventually that meeting has led to this strategic partner-
ship that we now enjoy with Sanofi,' he says. 'Sofinnova has
really opened doors for us.’

18
LaserBit Communications Corp.
LaserBit Communications Corp.
■ Activity: develops and manufactures free-space
optical lasers for voice, data and video transmission
systems and telecommunication equipment for
optical networks
■ Country: Hungary
■ Venture capital backers: Hungarian Innovative
Technologies Fund (HITF), Intel Capital, Sandler
Capital and Technologieholding CEE Funds,
advised by 3TS Venture Partners
■ Transaction summary: US$ 6.7 million (€7.4 million)
in two rounds of venture capital financing
In 1999, Bela Gyori and Janos Pallagi founded LaserBit
Communications Corp, basing the company around technology
spun out from their previous company Crown-Tech Ltd.
Throughout the years since then, LaserBit has been providing
innovative solutions using laser-based wireless and optical
telecommunication systems that are quick, reliable and secure.
Capable of transmitting any kind of digital information including
data, voice and video, LaserBit’s products can be integrated
into a wide variety of applications, including computer network
interconnections, PABX to PABX trunk links and GSM Base
Stations.
The venture capital companies also provide
Using light waves and operating at a
good leads and information about the market and
top transmission speed of 155 Mbps,
the company’s competitors, which Koenig says
LaserBit’s devices offer several
advantages over most other means
have helped LaserBit formulate
of transmitting data. Unlike fibre
optic cable, the technology used by LaserBit transmits infor-
mation in a cost-effective and easy manner to areas where
laying fibre optic cable would be impossible or too expensive.
The products are also extremely effective for use in areas
with limited space. And because they rely on infrared light to
transmit data, they do not require special regulatory permits to
operate, unlike radio or microwave links. The light waves are
also extremely difficult to tap, or even detect, thus allowing
for secure communications.
Other major advantages of this technology are that it offers
'last mile' connectivity, and that it is very quick to install,
with the system capable of being up and running in a matter
of hours. Its other main selling points include its reliability,
since transmission will rarely suffer from interference problems,
even in adverse whether conditions. Its system availability
rating is 99.999 per cent - meaning it is up and running
99.999 per cent of the time. And the energy efficiency of
LaserBit's products is very high, meaning low power usage is
another area where LaserBit is especially strong.
Target customers for LaserBit’s laser links and telecommunica-
tion equipment include ISPs, mobile phone operators, UMTS
systems, landline telecoms companies and other organisations
with multiple facilities - meaning just about everyone from
government bodies to medium and large corporations.
During its three years in operation LaserBit's growth has been
strong, and since summer 2000, the company has grown
from 19 to 57 employees. And in the last 18 months it has
added 57 contracted distributors to its network, with the
result that the company by now has sold its products in 39
countries worldwide. In 2001 it also set up subsidiaries in the
UK, and in Singapore to head up its Asia-Pacific operations.
LaserBit also opened a sales office in Brazil in 2002.
LaserBit’s innovative technology and its quick growth have
attracted the attention of many independent observers, and
at the end of 2001 the company won the Enterprise of the
Year Award from the Hungarian Venture Capital and Private
Equity Association.
The Venture Capital
Investment
its strategy.
When they founded LaserBit in
December 1999, Gyori and Pallagi each put in around
€50,000 of their own money and the technology they
had developed to get the company going. Concurrently, the
remaining early-stage funding, some US$700,000 (€724,000),
was provided by the Hungarian Innovative Technologies
Fund (HITF) for a 51% stake.
At the time of the first round of financing, the company knew
that it would need additional money to increase its production
capacity and to build up its global marketing and sales activi-
ties. HITF worked closely with the owners to achieve these
ends. Managing Director of HITF, Francis Skrobiszewski says
‘We knew that we had to secure second round funding, and
wanted to make sure that all the systems were in place to
make that happen as effectively as possible.’ ➞
19
‘HITF was also involved in encouraging LaserBit to hire the ‘Clearly the company enjoys a high level of board involvement
right people’. Says Skrobiszewski: ‘We were very focused on from the venture capitalists, including the necessary oversight
helping our manager-founders to build their organization, and discipline in terms of business plans. And, of course,
and eventually, when the time was right, we worked with they have brought forward candidates for key positions,’ says
them and the second round investors to identify and hire a Koenig. The venture capital companies also provide good
seasoned international executive as the new CEO for the leads and information about the market and the company’s
business.’ competitors, which Koenig says
As a result of a meeting arranged by have helped LaserBit formulate its
And on the strength of the business the VC (3TS) between LaserBit and strategy. And they have assisted the
plan and information memo pre- Orange Slovakia, the two companies company's growth in several other
pared with the help of HITF, com- are now working on a test trial. practical ways, including introducing
bined with the promise of its future LaserBit to potential partners and
potential, LaserBit was able to close a second round of helping to fine tune its sales pitches. As a result of a meeting
financing just months later, in December 2000. During this arranged by 3TS between LaserBit and Orange Slovakia, the
round, Intel Capital, Sandler Capital and Technologieholding two companies are now working on a test trial of LaserBit’s
CEE Funds advised by 3TS Venture Partners invested US$6 products for use in the Orange network. ‘We try to use our
million (€6.7 million) in three equal tranches. The company regional and telecoms contacts to open doors for LaserBit;
expects to close another round of financing in 2003. connecting them with another of our investments in Orange
Slovakia was helpful to both,’ comments Daniel Lynch of 3TS.
Of course, the venture capital companies brought more than
just their money to the table. According to Walter Koenig,
LaserBit’s new CEO, the venture capitalist have helped the
company ‘tremendously’ in a variety of ways through their
presence at board level. They were even involved in
Koenig’s recruitment, with the board doing the executive
search throughout Europe and the Middle East. After Koenig
was first interviewed by people from HITF and then 3TS, he
was introduced to the company.

20
Morphochem AG
Morphochem AG
■ Activity: integration of novel chemistries with
bio- and chemo-informatics and the post-genomic
tools of drug discovery.
■ Country: Germany
■ Venture capital backers: 3i Deutschland, Alta
Berkeley Associates, Alta California Partners,
Bankhaus Julius Bär, Bionex Investments, Domain
Associates, IKB Venture Capital, KB Lux, Life
Sciences Partners, Mayfield Fund, Merlin Biosciences,
Nomura (Terra Firma), Süd VC, TBG Deutsche
Ausgleichsbank, TVM, Viscardi AG, WestLB and
selected private investors
■ Transaction summary: €78 million in four rounds of
private equity financing
Morphochem AG began life in 1996 when Alexander
Dömling and Wolfgang Richter, both former PhD students
who had studied under Ivar Ugi at the Technical University
in Munich, decided - after their post-doctoral studies in the US
- to put Ugi’s multi-component reaction (MCR) chemistry to
commercial use. MCR chemistry efficiently generates com-
pounds from novel, very large and
highly diverse chemical spaces,
The founders quickly realised that they
and permits access to both simple
would need substantial cash resources to make
and complex molecules similar to
the leap from a small biotech service provider into
those found in nature.
a fully integrated drug discovery company.
Initially, the founders used MCR
chemistry to service pharmaceutical companies with libraries
of chemical compounds. In return, Morphochem received
revenues, but held no IP rights. This approach changed in 1997
when Morphochem decided to take its technology a step further.
Since then, the company has developed its drug discovery
engine, the MOREsystem™, which integrates the novel MCR
chemistry with in-silico and biological feedback loops, and
powerful bio-informatic tools based on evolutionary principles
(MolMind™). The system facilitates the rapid production of
many novel lead structures – potential drug candidates – and
allows for the creation of a defined number of compounds from
20
a very large matrix of 10 theoretically possible molecules.
Today Morphochem aims to bridge the gap between genomics-
driven new biology and the creation of small molecule drug
candidates.
A few of Morphochem’s compounds are already in the advanced
pre-clinical trial stage, and at least one drug candidate is set
for clinical trials sometime in 2003.
In addition to developing its own pipeline of drug candi-
dates, Morphochem also enjoys successful alliances with life
sciences companies, such as Aventis, which involve research
and success-driven milestone payments, as well as royalties
on marketed products. To build and expand its technology
platform further, Morphochem is also involved in collaborations
with researchers from universities and institutions, such as the
Fox Chase Cancer Center in Philadelphia; UCLA in Los Angeles;
the Institute of Biochemistry of Plants, Halle and Marburg,
Germany and the University of Barcelona, Spain; and biotech
companies including Sosei, Automated Cell and Migragen.
The Venture Capital Investment
The founders quickly realised that they would need substantial
cash resources to make the leap from a small biotech service
provider into a fully integrated drug discovery company. That
was when Dömling and Richter approached Dr. Schühsler
of TVM about the initial financing to deliver this strategy.
Now chairman of the board at
Morphochem, Dr Schühsler recalls:
‘They convinced me that this was a
good investment, but it was not
easy. Multi-reaction chemistry had
already been around for 30 years.’
The difference was that Dömling
and Richter had a compelling case that they could do ‘MCR
chemistry better and faster, while producing more complex
reactions and a whole new world of compounds,’ recalls Dr
Schühsler. Together with Alta Berkeley, TVM invested €2 million
in January 1998, and the company received an additional
€3.2 million in the form of low-interest silent partnerships
through federal and state government programmes.
A year and a half later, Morphochem’s management realised
they needed to expand the product applications and grow its
facilities. A second round of financing raised €14.3 million
to provide funding for the expansion both of its products and
premises. The financing included new equity funding from
investors including TVM, Alta Berkeley Associates (UK),
Alta California Partners (US), IKB Venture Capital, TBG and
Süd VC. ➞
21
To finance the company’s acquisitions and expansion abroad, Through their representation on Morphochem’s board, the
Morphochem closed a third financing round in July 2000. venture capital backers also act as a sounding board for
Besides further investment from all its existing backers, management’s ideas and strategies. And Morphochem also
Morphochem also attracted a host of new investors, and the has access to the venture capital companies’ industry experts
funds raised amounted to €40.7 million. To secure sufficient any time they need them.
funding, Morphochem closed a fourth round in July 2001,
raising another €15 million, which, due to the recent restruc- Loeser credits the strong international reputation of Morpho-
turing of Morphochem, will easily take it into July 2004. chem’s initial investors with enabling the company to ‘further
build an industry-experienced,
The practical help of Morphochem’s long-term committed syndicate.’
The practical help of Morphochem’s
venture capital partners has played a Loeser continues: ‘In the second
venture capital partners has played a vital role
vital role in the company's growth round we attracted Jean Deleage of
in the company's growth from a small
from a small German operation into Alta California Partners, one of the
an international group with approxi-
German operation into an international group. most well-respected personalities in
mately 100 employees spread international biotech circles. And
across offices in Munich, Basel, Switzerland and Monmouth with him on board we were able to expand our syndicate
Junction, New Jersey. into the US, one of the most dominant pharmaceutical markets.
We very much appreciate the close relationship and mutual
In early 2000, with the assistance of TVM, Morphochem understanding we have with our venture capital partners, as
acquired Small Molecule Therapeutics Inc. (SMT) in New their back-up in these difficult markets of 2002 becomes
Jersey. ‘The acquisition of SMT was actually suggested by an increasingly invaluable day by day.’
advisor within the TVM network,’ says Thomas Loeser, CFO
of Morphochem. TVM supported the deal - executed in the
form of a ‘triangle reverse merger’ - which saw Morphochem
buy 100 per cent of SMT’s shares, cashing out all of SMT’s
shareholders and giving the US venture capital companies the
opportunity to buy back an 8 per cent stake in Morphochem’s
shares. The deal was completed in less than three months.
With the addition of SMT, Morphochem gained additional
expertise in complimentary biology and screening technologies.

22
No Wires Needed
No Wires Needed

At about the same time, the big IT companies - the likes of

■ Activity: developing WLAN and other wireless Cisco, 3Com, Compaq and Dell - began to venture into the
solutions wireless arena. ‘That is when the market really started moving,’
■ Country: The Netherlands recalls van der Hoek.
■ Venture capital backers: 3Com, Gilde IT Fund,
Kennet Capital, Parnib Converging Technologies Thanks to its expertise and its head start in the wireless field,
and private investors NWN quickly became an established industry leader in wireless
■ Transaction summary: US$8 million (€7.6 million) solutions that provided connections to broadband communica-
in two rounds of venture capital financing tions in homes, small offices and across corporate complexes.
■ Exit: trade sale by Intersil in 2000 for approximately The company also developed advanced encryption software
US$149 million (€158 million) in a share swap to ensure secure communications in multi-user locations.
NWN's biggest strength was in its medium access control
(MAC) technology. MACs are the operating systems for wire-
less networks, and NWN’s MACs offered security superior to
No Wires Needed (NWN) was born on the campus of the anything else that was on the market. Van der Hoek explains,
University of Twente (UT) in the Netherlands in 1992. ‘Even today there are issues with Wi-Fi security. NWN’s MAC
Enamoured with the internet, five students - Ron Brockmann, systems have always been much more advanced and more
Remi Blokker, Maarten Hoeben, Arnoud Zwemmer and Andre secure than those of its competitors.’
Blum, the majority of whom studied at UT - envisioned a day
when the web would be available everywhere. Wireless NWN’s success meant a jump in revenues, and the company
solutions, they concluded, was how it could happen. saw a ten-fold increase in sales from 1998 to 1999. Employee
numbers also rose, and by 2000 the company had about 60
The students started out by studying the wireless local area people working for it in its facilities in Bilthoven (Netherlands)
network (WLAN) standard IEE802.11 (also known as Wi-Fi) and offices in Menlo Park and Coventry (UK).
and wireless radio infrastructure, and began making proto-
types. Most of the work was done after classes and during
holidays in rented office space. ‘They mainly worked on The Venture Capital Investment
codes and problems,’ says Hans van der Hoek, the compa-
ny’s former CEO, when detailing the company’s genesis. The company managed to survive its first five years on small
investments of cash and equipment, such as computers, from
At the time, wireless solutions were impractical because of family members and friends. But upon graduating from
the costs involved, but NWN got a lucky break: By the time university, the founders began looking for venture capital to
the students graduated in 1997, powerful low-voltage silicon jump-start the company's operations on the world stage.
chips had fallen in price. This in As not all investors understood the
turn made the use of wireless solu- potential of wireless solutions yet,
The company managed to survive its first five years
tions more possible, as it allowed this was not an easy task.
on small investments of cash and equipment, such
for the creation of cost-acceptable
as computers, from family members and friends.
wireless infrastructures and PC Recognizing the company's poten-
But upon graduating from university, the founders
cards. tial, but considering its early stage,
began looking for venture capital to jump-start Gilde IT Fund provided €250k
NWN’s first major market break- the company’s operations on the world stage. seed financing in early 1998 and
through was its development of an committed further financing based
11-megabit per second WLAN solution - the first of its kind - on milestones. It then worked with the company to recruit an
which the company began shipping in the summer of 1999. experienced CEO. This resulted in a €2.2 million financing
From then on, NWN continued rolling out its solutions. round in October of 1998, provided by Gilde and Parnib
Converging Technologies, together with private investors. ➞

23
‘That is when I came in,’ recalls van der Hoek. A second
financing round in January 2000 brought in Kennet Capital and
3Com Corporation and raised US$5.5 million (€5.4 million),
with US$1 million (€1 million) of that coming from private
investors.

According to van der Hoek, ‘The real value added by the

VCs was that they turned out to be excellent sparring partners.
I had plenty of opportunities to bounce ideas off them and
discuss the direction of the company. That is something
every CEO needs.’

Van der Hoek also believes the VC investors' advice about

how to handle acquisition offers was crucial to the company’s
successful sale in 2000. ‘We always had the intention of doing
an IPO. Then, when we began hearing rumours of offers for
NWN, our VC backers suggested that we talk to an investment
banker right away,’ recalls van der Hoek. ‘They said that it was
important to go ahead and speak to an investment banker in
order to have a clear idea of what we wanted from a sale.’

This advice proved invaluable. In June 2000, NWN was

acquired by Intersil, a US-based leading provider of chip sets for
the WLAN market. Intersil paid the equivalent of approximately
US$149 million (€158 million) through a share swap bid of
three million Intersil shares for NWM.

‘Because of the advice from our VC backers, we were well

prepared by the time we did receive the offer from Intersil,’
says van der Hoek. The preparation paid off: the integration
of NWN into Intersil is a success story, and two years on 75
per cent of NWN’s former employees are still employed by
Intersil, including NWN’s five founders. Van der Hoek adds:
‘And through the deal we gave tremendous shareholder
value - 32 of our 57 private shareholders became millionaires.’

24
Novuspharma S.p.A.
Novuspharma S.p.A.
■ Activity: novel oncology therapeutics
■ Country: Italy
■ Venture capital backers: 3i Italy, Atlas Venture
and Sofinnova Partners
■ Transaction summary: one venture capital investment
of €18 million
The origins of Novuspharma date back to F. Hoffmann-La
Roche’s 1997 takeover of Boehringer Mannheim. As part of the
integration programme following the merger, staff at Boehringer’s
R&D centre in Monza, Italy were asked whether they would to
move to other centres within F. Hoffmann-La Roche. Preferring
to stay in Italy and continue their research, five managers from
the Italian R&D centre approached Roche with the idea of
spinning off a new company based on technology developed
by the centre and located in the same facilities. Roche agreed
to the plan - and in early 1999 Novuspharma was established
as a separate company, before becoming fully independent
of the Roche Group in September of the same year.
The 50 researchers that originally moved from the R&D centre
to Novuspharma had worked together at Boehringer for almost
a decade, specialising exclusively in anticancer drug discovery.
Today Novuspharma continues to draw on the strong R&D
experience of its team to develop new drug targets in the field
of oncology. Committed to creating safer, more effective and
more convenient therapies for a number of cancers, including
lymphoma, leukaemia and prostate, stomach and lung cancer,
Novuspharma’s work has led to the discovery of several inno-
vative and highly promising anticancer compounds. Four of its
products are in clinical trials - one in phase III and three in
phase II. The company also has a rich product pipeline, and is
currently conducting discovery research for several new projects.
Novuspharma’s venture capital investors
played a crucial role in the company’s genesis.
Novuspharma also maintains alliance and collaboration
agreements with companies such as Cephalon in the US,
SignalGene in Canada and Micromet in Germany. It also
carries out research on a contract basis for big pharma com-
panies such as Roche, and provides services to third parties
in bioanalytics, clinical pharmacokinetics, formulation
development and manufacturing.
In 2001 Novuspharma's successful contract research services
helped to drive a 14 per cent increase in the company's
annual revenues.
The Venture Capital Investment
The initial venture capital contact came via a recommendation
from one of the founders of Actelion. Antoine Papiernik of
Sofinnova Partners and Joël Besse of Atlas Venture met with
Max Brauchli at F. Hoffmann-La Roche, to discuss possible
ways in which to spin off this business unit.
Novuspharma’s venture capital investors played a crucial role
in the company’s genesis. Cesare Parachini, Novuspharma’s
Chief Financial Officer, explains: ‘Roche did not want to keep
the Italian research centre in Monza and it was essential to
find financing in order to set up Novuspharma and continue
our research.’ In addition to providing finance, the venture
capital investors were also involved in contributing valuable
advice and expertise, including playing a big role in creating
the structure of the new company. Atlas Venture and Sofinnova
Partners also led the negotiations that determined the number
of people that would join Novuspharma from the R&D centre
and the products to be spun off with the business.
In September 1999 the negotiations were concluded and a
holding company, Novuspharma Invest, was established to
purchase Novuspharma from Roche. Novuspharma Invest was
owned in three equal parts by Atlas Venture, 3i and Sofinnova.
The original venture capital investment in Novuspharma was
€18 million. Atlas Venture and Sofinnova Partners also helped
the company recruit personnel and a scientific advisory board,
while all three of Novuspharma’s venture capital investors
continue to provide valuable input as members of its board.
With a strong pipeline of cytotoxic drugs, Novuspharma was
already in a position to go public little more than a year after
its creation. Parachini points out that the assistance of
Novuspharma’s venture capital investors was also crucial at
this stage: ‘Our venture capital partners helped us choose an
investment bank and gain access to fund managers.’ In early
November 2000 Novuspharma listed on the Milan Stock
Exchange’s Nuovo Mercato, with the company raising €155
million from the offering. ➞
25
‘This was an unusual situation, Novuspharma only needed one
venture capital injection before going public.’

‘This was an unusual situation,’ recalls Joël Besse of Atlas

Venture. 'Novuspharma only needed one venture capital
injection before going public.’ Antoine Papiernik agrees: ‘in
terms of a venture capital investment, this was an outstanding
operation. The company really benefited from the timing of
the IPO - it was on the end of a bull market. When it listed,
Novuspharma’s market capitalisation shot up to €500 million.’

On the day of the IPO Novuspharma’s venture capital

investors sold some of their shares. But they have not yet
completely exited the company, because the market for
biotech shares worsened shortly after Novuspharma’s IPO
and has not improved much since then. The venture capital
investors do not believe the right time for exiting the company
completely has yet presented itself. And until it does, Besse,
Papiernik and representatives from 3i will continue to assist
Novuspharma in building up its market strength and fleshing
out its strategy through their seats on the company’s board.

26
Tiscali S.p.A
Tiscali S.p.A
■ Activity: provides internet access, portal and
e-commerce services along with business
applications and value-added communications
services to customers throughout Europe
■ Country: Italy
■ Venture capital backers: Kiwi I Ventura Serviços SA,
advised by Pino Venture Partners
■ Transaction summary: €2 million in seed investment
in 1998
■ Exit: IPO on the Nuovo Mercato in October 1999
Shopping-mall developer Renato Soru invested US$600,000
(ECU 514,000) of his own money to launch Tiscali in 1998 after
the liberalisation of the Italian telecommunications market.
At first armed only with a regional operator license, Tiscali
made rapid headway. Within a few months it was awarded a
licence to provide voice telephony in Sardinia, Milan and
Rome, and by March 1999 Tiscali had a licence to supply
voice telephony throughout the country.
With the strategic objective of becoming a heavyweight ISP,
Tiscali also launched TiscaliNet - continental Europe’s first free
internet connection service - in March 1999. The move forced
Tiscali’s competitors to take notice
of the newcomer, and Telecom Italia Tiscali's continuing drive to become a dominant
quickly followed Tiscali’s lead and pan-European player has been reflected
began offering free internet access
by the series of acquisitions it has made
as well. Tiscali’s brave move had a
throughout Europe since the beginning of 2001.
tremendous impact on the develop-
ment of the internet market in Italy,
more than trebling the country’s number of frequent net users
up to three million. The outcome for Tiscali’s market share was
equally impressive, giving it around 30 per cent of the Italian
internet access market. Today Tiscali has expanded its reach
across Europe. It now has 7 million active users, and registered
20 billion minutes of internet traffic in the first half of 2002 -
consolidating its position among the leading European ISPs.
Cagliari-based Tiscali has also become one of Europe's leading
value-added telecommunications service providers, offering its
customers integrated internet access, portal and e-commerce
services along with business applications and value-added
communications services.
The company's integrated approach to its portfolio of services,
plus its innovative offerings and marketing strategies, has
enabled it to compete effectively with traditional telecom-
munication and cable companies. And it is currently a major
player in each of the five main markets of continental Europe.
In order to maintain its leading market position and offer its
customers innovative services, Tiscali continues to focus on
developing activities in the areas of new telecoms, new
media and B2B services. And to help keep its costs low and
maintain total control over the quality of its connections,
Tiscali has its own fibre optic network - an international
backbone over more than 12,000 km long that connects
with Tiscali’s national networks, making up a total of over
50,000 km of interconnected networks.
Tiscali's continuing drive to become a dominant pan-European
player has been reflected by the series of acquisitions it has
made throughout Europe since the beginning of 2001, which
acquisitions include World Online, a leading Dutch ISP with
operations in several European countries, and Liberty Surf,
the ISP leader in France. The company acquired 16 ISPs during
2001 alone. In addition, Tiscali has also purchased several other
telecoms-related businesses focused on areas ranging from
laying fibre optic cables and operating fibre optic networks, to
designing networks for wireless communications and providing
phone and other communications
services. Today Tiscali’s reach spans
across Europe, with a significant
presence in 15 countries and around
3,000 employees.
The Venture Capital Investment
At the company’s inception, Soru had difficulty finding potential
investors, but after almost a year in operation Tiscali’s success
began to attract the interest of venture capitalists. In November
1998 Tiscali concluded a venture capital agreement with Kiwi I
Ventura Serviços SA, a fund advised by Pino Venture Partners.
Kiwi injected €2 million into Tiscali in return for 10 per cent
of the equity. In addition to the funding, Tiscali also benefited
from Pino Ventures' practical assistance, including helping the
company structure its business plan. When Tiscali was ready
to debut on the market, Pino Ventures helped it establish
relationships with players in the investment community. ➞
27
Because of the then buoyant market in telecoms stocks and
Tiscali’s success in the Italian market, the company was able to
go public little more than 18 months after its launch. In October
1999 Tiscali listed on the Italian Nuovo Mercato, raising €139
million and the Kiwi fund exited its investment during 2000.
The funds were earmarked for the financing of Tiscali’s
expansion strategy. Soon after its listing the company became
the leading blue chip on the Nuovo Mercato with an initial
capitalisation of €718 million. Of course, Tiscali shares have
also been impacted by the subsequent fall in telecoms stocks
world-wide, but as of December 2001 it still maintained the
highest capitalisation on the Nuovo Mercato, at €3.6 billion.
Tiscali also listed on the French Nouveau Marché in June 2001.

28
 Updated Technology Success Stories
In 1997 and 1999, EVCA published previous editions of its European Technology Success Stories paper.
The following stories have been updated for this edition and illustrate that venture capital backing
establishes technology companies for long-term success.

29
30
Dr Solomon’s Group Plc
Dr Solomon’s Group Plc
■ Activity: anti-viral software
■ Country: United Kingdom
■ Venture capital backers: 3i Group Plc and Apax Partners
■ Transaction summary: £14.75 million (ECU 18.1
million) provided for a management buyout
■ Exit: dual listing on Nasdaq and Easdaq (Nasdaq
Europe) in November 1996
Alan Solomon and his wife Susan started their specialist software
company, S&S International, as a part-time business. Their first
break came when the Lotus 1-2-3 spreadsheet programme was
launched in the UK. The Lotus software contained some errors,
and Alan wrote another programme to correct these. Alan went
on to join his wife full-time in the business, and wanting to
diversify, he set his sights on writing anti-virus software. Gaining
experience solving problems for both small and large clients
caused by viruses, Alan quickly became known as a virus guru.
He created Dr Solomon's Anti-Virus Toolkit as a result of his work
helping an important financial institution after its systems had
been infected with the Jerusalem virus. S&S produced 500 copies
of the software, thinking it would last a couple of years. In fact,
the stock lasted a month.
Their first break came when the Lotus 1-2-3
With the rapid growth of the PC
spreadsheet programme was launched in the UK.
market, and the inevitable viruses
The Lotus software contained some errors, and
accompanying it, S&S International
expanded quickly. In 1991, a stake
Alan wrote another programme to correct these.
was acquired in a PC security business
in Germany and in March 1995, Dr Solomon's Software GmbH
began distributing the Toolkit in Germany, Austria and
Switzerland. The year 1995 also saw the establishment of S&S
International’s first US office.
The Private Equity Investment
At about this time the Solomons were looking for ways to realise
part of their investment in the company and considered an IPO or
a takeover. But the company’s management had other ideas, and
they proposed a buyout. The Solomons agreed to sell them the
anti-virus part of S&S International, but to do this the management
team needed financing. They approached various venture capital
houses and chose Apax because of their reputation for being
high-tech oriented. Apax also offered the best terms. The MBO,
valued at £30 million (ECU 36 million), was concluded in
February 1996, financed by Apax (£13 million – ECU 16 million)
and 3i (£1.75 million – ECU 2.1 million). Bank debt was provided
by the Bank of Scotland. The new company took the name Dr
Solomon’s, and Dr Peter Englander - who was responsible for
Apax’s investment - took a seat on the board. He advised on
practical matters, such as an employee share option scheme,
and helped introduce new customers.
Because of Dr Solomon’s rapid expansion in both the US and
Europe during 1996, the company was able to float much earlier
than first anticipated. The management team was eager to float
in order to reduce borrowings, as well as to release capital
for further development. While Nasdaq was the most suitable
exchange for Dr Solomon’s flotation, Easdaq (now Nasdaq
Europe) was also considered, since a listing on it would increase the
company's European exposure. Here again, Englander provided
crucial assistance, both helping with the flotation plans and
encouraging a dual listing on Easdaq and Nasdaq. Dr Solomon’s
listing on Nasdaq brought in US$97 million (ECU 116 million).
By 1998, Dr Solomon's had become a leading supplier of anti-
virus software and developer of anti-virus software programs for
PCs and PC networks. Products from ‘Dr Solomon’s Anti-Virus
Toolkit’ family of software programs
provided effective and easy-to-use
software solutions to the risks posed
by the proliferation of new and
increasingly sophisticated computer
viruses. The Toolkit became one of
the leading global anti-virus software
programs by 1998, and could detect and identify more than
19,000 known computer viruses.
This success attracted widespread attention and, in June of 1998,
Dr Solomon's Group was acquired by Network Associates Inc, at
a valuation of approximately US$642 million (ECU 550 million).
The valuation represented an 89 per cent increase on Dr Solomon’s
November 1996 IPO share price of US$17.00 (ECU 13). Network
Associates Inc. is the parent company of McAfee, which has
incorporated the know-how from Dr Solomon’s software into its
own products. Some Dr Solomon’s software packages are still
available today through McAfee.
■ First published in March 1997,
updated Summer 2002
31
32
Flomerics Group Plc
Flomerics Group Plc
■ Activity: computational fluid dynamics software
for the thermal analysis of electronic design
■ Country: United Kingdom
■ Venture capital backers: MTI Partners and private
investors
■ Transaction summary: £720,000 (€1.1 million –
conversion as of 5 September 2002) in one round
of financing and a rights issue
■ Exit: IPO on AIM in December 1995
With the growth of the electronic sector in the 1980s, thermal
issues became increasingly important, because it was neces-
sary to know the precise cooling requirements of any system at
its design phase. But at the time, cooling requirements could
only be addressed at the prototype stage or by specialist
computational fluid dynamics (CFD) engineers using complex
software, which was both time-consuming and expensive.
Taking advantage of this gap in the market, David Tatchell and
Harvey Rosten, founded Flomerics to develop CFD software
designed to simulate thermal exchange at the pre-prototyping
phase of development.
Initially Flomerics operated as a partnership,
Flomerics’ first product, FLOTHERM
but in order to develop the product fully
Version 1.2, became available in
and grow the business, the founders realised
September 1989 for use by elec-
that they would need to expand by raising
tronic engineers. And by the late
1990s, it had been adopted by
venture capital backing.
most of the major electronics
groups in Europe and the United States. With help from MTI
- its venture capital backer - Flomerics established its first
international subsidiary in 1990 in the US. A second US
office was opened a few years later. Subsidiaries in Germany
and France were also set up, and Flomerics continued to
expand by using local distributors in other major markets.
The Venture Capital Investment
Initially Flomerics operated as a partnership, but in order to
develop the product fully and grow the business, the founders
realised that they would need to expand by raising venture
capital backing. Flomerics needed at least £250,000
(€394,000 – conversion as of 5 September 2002) to implement
the company’s strategy, and Tatchell and Rosten approached
several venture capitalists to obtain financing. After weighing
up their options they chose MTI, and in February 1989 Ernie
Richardson at MTI invested £300,000 (€473,000 – conversion
as of 5 September 2002) in return for a stake of 62.5 per cent.
MTI believed that this investment would enable the develop-
ment of a viable commercial product and see Flomerics through
to profitability. At this point, Ernie Richardson's involvement
was at a practical, hands-on level, helping introduce financial
reporting systems and providing management support.
By late 1991, Flomerics found itself in need of an extra cash
injection to fund further development, so at the end of 1992,
Flomerics made a rights issue. And MTI put in an additional
£250,000 (€394,000 – conversion as of 5 September 2002).
At the same time Flomerics’ employees invested £170,000
(€268,000 – conversion as of 5 September 2002).
Toward the end of the fixed-term 10-year partnership, MTI
began to look for exit possibilities. Flomerics' management
wanted, if possible, to remain independent and autonomous.
Due to the company's size, a full listing on the London market
was not appropriate. But both MTI and Flomerics felt that a
listing on London's AIM market for growing companies would
provide the exit that MTI was look-
ing for, while maintaining
Flomerics’ independence and also
ensuring that it had sufficient addi-
tional funds. Since MTI helped
Flomerics institute financial report-
ing systems after the first round of
financing, Flomerics was already
being run in a manner that met with AIM's requirements. MTI’s
foresight in this area added enormous value to Flomerics, help-
ing it avoid the need for expensive auditing. The company was
floated on 6 December 1995 at a market capitalisation of
£3.3 million (€5.2 million – conversion as of 5 September
2002), generating a very good return for MTI.
In July 1999, Flomerics announced a merger with Kimberley
Communications Consultants (KCC) Ltd. The merger was timely,
as the inter-activity between Electromagnetic Compatibility
(EMC) and thermal engineering in a typical design project had
increased dramatically by then. And this strategic development
helped Flomerics move into the area of EMC, and with the com-
bined expertise of the two companies, FLO/EMC was developed.
FLO/EMC is a powerful computational tool for analysing electro-
magnetic emissions from enclosures and cabinets. ➞
33
Although Flomerics' sales and pre-tax profits grew steadily in
1999 and 2000, they dropped off in 2001 as a result of the
global economic situation. But the good news for the com-
pany is that in a recent independently-conducted customer
satisfaction survey, 96 per cent of its clients said they would
recommend its products and services to others. With such a
strong reputation and satisfied client base, no wonder Flomerics
continues to enjoy the reputation of market leader and inno-
vator and has become an international leader in the field of
virtual prototyping.

Flomerics continues to enjoy the reputation of market leader

and innovator and has become an international leader
in the field of virtual prototyping.

Today the company has 128 employees in four offices in the

US, as well as offices in France, Germany, Italy, China and
Singapore. Flomerics also employs specialists agents to
cover Japan, Taiwan and Korea. And it continues to develop
innovative products, including FLO/EDA, a web-based soft-
ware product for the rapid creation of thermal models of
printed circuit boards. The benefits of its products include a
dramatic reduction in new product development time, lower
production costs and improved product quality.

■ First published in March 1997,

updated Summer 2002

34
Innogenetics N.V.
Innogenetics N.V.

therapeutic products, GIMV decided to put up BEF25 million

■ Activity: discovery and development of diagnostic (€620,000 – conversion as of 5 September 2002) in the first
and therapeutic products round in exchange for 25 per cent of the equity. The remaining
■ Country: Belgium funds were obtained from the founding team, business
■ Venture capital backers: Alta Berkeley Venture Partners, angels and loan financing.
Baring Hambrecht Ventures, Eurocontinental
Ventures, GIMV, JAFCO and Kredietbank As is typical with rapidly-expanding pharmaceutical companies,
■ Transaction summary: €21 million in two financing Innogenetics had a huge demand for cash, and this need
rounds and private placements escalated in 1988. This meant that new investors had to be
■ Exit: IPO on Easdaq (Nasdaq Europe) found, and GIMV played an instrumental part in bringing them
in November 1996 in. And to increase Innogenetics’ capitalisation, Kredietbank
was approached in 1996. Kredietbank agreed to provide BEF
365.9 million (ECU 9.4 million) in mezzanine financing in
return for an agreement that it would manage Innogenetics'
Wanting to establish a new biotechnology company focused flotation on Easdaq, now Nasdaq Europe.
on DNA-based diagnostic products, Rudi Marien and Hugo
Van Heuverswyn founded Innogenetics in 1985. Marien had Dirk Boogmans, now the CEO of GIMV, was at the time
experience as an entrepreneur in the pharmaceutical industry, responsible for GIMV’s investment in Innogenetics, and worked
while Van Heuverswyn, one of the top biogenetic scientists at as one of two managers on the project. Dirk also took a seat on
Ghent University, was interested in taking advantage of the Innogenetics’ board, advised on strategy decisions and acted
possibilities that were opening up in the field of new diagnostic as a sounding board for management’s plans. As Innogenetics
products. grew, he also helped with an employee stock option plan and
finally advised the company on its listing on Easdaq, now
Innogenetics began developing Nasdaq Europe.
diagnostic kits for HIV testing, and
In the beginning, the company’s founders
products for other disease areas grew Innogenetics became one of the
planned to generate cash flow by selling
out of the initial success of this first companies to float on Easdaq,
diagnostic equipment, which would in turn fund
product line. Today its therapeutics listing in November 1996. The IPO
the research and development of diagnostic and
division targets two disease areas - raised €79 million and gave Inno-
Hepatitis C and immune disorders
therapeutic products. But to get the company up genetics a market capitalisation of
- while its diagnostic research and running they needed financing. €210.8 million.
focuses on infectious diseases,
neurodegeneration and genetic predispostion testing. Phase II In early 2000, Innogenetics appointed a new CEO, Philippe
clinical trials of Innogenetics’ vaccine against hepatitis C now Archinard, former corporate vice president of BioMérieux to
taking place are showing positive results and the business improve the company’s strategy. Archinard’s goal was to
also has two new pre-clinical programs underway. redevelop the therapeutics division and bring the diagnostic
business to profitability. This led to a distribution agreement
with Bayer Diagnostics in 2001. His strategy has paid off - the
The Venture Capital Investment diagnostic business broke even in 2001 and is expected to be
profitable in 2002. For 2001 the company also announced a
In the beginning, the company’s founders planned to generate 49 per cent reduction in its operational loss and a 30 per cent
cash flow by selling diagnostic equipment, which would in increase in its total revenues to €59.1 million, largely due to
turn fund the research and development of diagnostic and its commercialisation agreements with Bayer and Roche. ➞
therapeutic products. But to get the company up and running
they needed financing. So Marien contacted GIMV and pre-
sented it with Innogenetics' business plan. Interested in the
possibilities that lay ahead in the field of diagnostic and

35
In 2001 XCELLentis, a 100 per cent-owned subsidiary, was
spun off from the company to develop and run its wound
care business. To date XCELLentis has developed a number
of innovative wound care products such as epithelial sheets
and a hydrogel dressing. And it also has one biological product
currently in phase II trials.

Since flotation the business has continued to grow,

and it now has over 580 employees with operations
in Belgium, France, Germany, Italy, Spain,
the US and Central Europe.

Since flotation the business has continued to grow, and it

now has over 580 employees with operations in Belgium,
France, Germany, Italy, Spain, the US and Central Europe.

■ First published in March 1997,

updated July 2002

36
Maconomy A/S
Maconomy A/S
■ Activity: develops ERP software for people-oriented
companies
■ Country: Denmark
■ Venture capital backers: 3i Denmark, Gilde IT Fund,
J&W Seligman & Co, Paul Capital Partners,
PPU Software, Star Ventures and Vertex Management
■ Transaction summary: DKK30.6 million
(€4.1 million – conversion as of 5 September 2002)
raised in several rounds of financing
■ Exit: IPO in December 2000 on the Copenhagen
Stock Exchange
Originally, Per Tejs Knudsen founded PPU Software A/S with
two business associates to develop software for minicomputers.
But quickly realising that the future in the market was limited,
they decided to focus on developing software for Apple
Macintosh systems. In 1988 Maconomy was spun out from
PPU Software to do this.
As advertising agencies were the only large businesses that
used Macs at the time, Maconomy began designing software
to fit in with the industry’s project-based services. But it soon
became clear that a strategy based
on Macintosh products alone was
In 2002 Maconomy has gained fresh impetus
too restrictive, so in the mid 1990s
for growth through partnerships with leading
the company launched UNIX server
consulting firms in the Netherlands and Sweden.
and Windows-based versions of its
software. This was how Maconomy
began its journey to market leadership as the world’s first
supplier of integrated software solutions for the service
industries.
Maconomy’s software is considered the ERP (or enterprise
resource planning) solution for service-oriented enterprises.
Traditional ERP solutions - which were the hottest software
packages for much of the 1990s - were mostly designed to
provide end-to-end support for product-based business
processes such as manufacturing. But Maconomy’s software
was developed specifically to support the business processes
of project-based service companies that bill for time rather than
goods. Maconomy is constantly improving the competitiveness
of its software package, and it now offers internet and WAP-
based interfaces and products.
The Venture Capital Investment
When it was first established, the process of attracting inter-
national venture capitalists took more than a year, and they
invested only when the company proved that it could meet
its budget. In 1997, based on its strong technology, broadening
product line and international results, Maconomy was able to
attract venture capital from international investors, such as Gilde
and Vertex. Maconomy’s other venture capital backers are
Israel's Star Venture and 3i - whose investment in Maconomy
was its first in a Danish company. Most of Maconomy’s
employees also invested in the company as well, reflecting
their faith in its products and strategy.
In the light of the continued strong growth in Maconomy's
sales and target market, its management decided to launch an
IPO on the Copenhagen Stock Exchange in December 2000.
Despite considerable turbulence in the international stock markets
at the time, the company was able to successfully complete
the IPO and raised DKK240 million (€32.3 million), providing
the foundation for the future growth of the company.
Maconomy currently has about 220 employees spread through-
out the world in Denmark, the US, the UK, Scandinavia and
Germany and over 600 international clients in more than
25 countries, including American
Express, AVIS/Cendant, Cable &
Wireless Business Networks, Copen-
hagen County, Deloitte & Touche,
IBM Research Lab and KPMG.
In 2002 Maconomy has gained fresh impetus for growth
through partnerships with leading consulting firms in the
Netherlands and Sweden. The agreements allow Maconomy to
set up practices within these organisations, which will enable
them to offer solutions to top people-oriented organisations
in the Benelux countries, Germany and in Sweden.
In June 2002, Per Tejs Knudsen handed over the company’s
executive management to CEO Bent Larsen and COO Bo
Johansson and has been consigned to the board to assist in
further developing the strong visions of Maconomy.
■ First published in October 1999,
updated Summer 2002
37
38
SCM Microsystems, Inc.
SCM Microsystems, Inc.
■ Activity: provides solutions enabling quick and
secure control, access and exchange capabilities for
digital information
■ Country: Germany
■ Venture capital backers: Alpinvest (NIB Capital
Private Equity), Genevest Consulting Group,
Telenor Venture AS, TVM Techno Venture
Management GmbH and Vertex Management
■ Transaction summary: two rounds of venture capital
financing, with DM 3 million (€1.5 million –
conversion as of 5 September 2002) and US$7 million
(€7 million – conversion as of 5 September 2002)
received in 1993 and 1995, respectively
■ Exit: dual listing on Nasdaq and the Neuer Markt in
September and October 1997
With the establishment of the PCMCIA - an organisation set up
to introduce standards for integrated circuit cards and to promote
interchangeability among mobile PCs - Robert Schneider
decided to create a company that would focus on PCMCIA
peripheral products. Together with Bernd Meier he launched
SCM Microsystems in 1990. But in 1994 SCM moved away
from producing PCMCIA cards and
peripherals, after it realised that
SCM needed more financing before going public
the margins in the market would
in 1997, and it was able to attract funding
eventually become unsustainable.
from venture capitalists, as well as
That move was a masterstroke.
corporate strategic investors.
Today SCM is a leading provider of
products and technologies that enable quick and secure control,
access and exchange of digital information. SCM’s solutions are
cost-effective, reliable and versatile and can support multiple
platforms, protocols and standards. Built using the company’s
core security and connectivity technology, the solutions can be
used to provide conditional access to mobile, handheld and
desktop computers, workstations, digital video broadcasts,
virtual private networks, electronic files, e-mail and internet
firewalls.
The Venture Capital Investment
From 1990 to 1993, Schneider and Meier financed SCM’s
development with their own money. They then realised that
to grow quickly they would have to develop a significant
presence in the United States - and that to do this, they would
need more financing. Although at the time venture capital
was scarce in Germany, TVM committed funds and put
together a consortium of venture capital investors. At the
time the investment was considered high risk, so the venture
capitalists were rewarded for their bravery with a very low
valuation. SCM reincorporated in Delaware in December
1996 to give it more market credibility.
SCM needed more financing before going public in 1997,
and it was able to attract funding from venture capitalists, as
well as corporate strategic investors such as Telenor, Gemplus
and Intel. These companies entered into collaborative industry
relationships with SCM and took significant stakes in the
company. The agreements covered plans for research and
development of new technology, joint marketing activities,
common manufacturing opportunities, licensing and supply.
In addition to funding, TVM was able to provide SCM with
assistance vital to its success. In SCM’s early days, the company
knew how crucial it was to break into the huge American
market. TVM, with an operation in Boston, was a source of
support both for SCM’s American entry, and also for its inter-
national expansion strategy as a whole. TVM also took a seat on
the board in 1993 and continued
to support the company by acting
as a sounding board for SCM’s
management.
In 1997, SCM moved into profit
and was ready to go public. It was
the third German company to list on Nasdaq, the seventh to
list on the Neuer Markt and the first to take a dual listing on
both markets. The venture capitalists, led by TVM, which had
experience in taking a German company to Nasdaq, coached
the management of SCM through the initial public offering.
About one third of the company was floated in October
1997 at US$13.00 (ECU 11) per share, for a total market cap-
italisation of US$130 million (ECU 114 million), on revenues
of US$27.6 million (ECU 25 million) and a profit of US$1.1
million (ECU 1 million) at year end. This initial offering went
well and was soon followed by a second offering in April 1998
at US$61.00 (ECU 52) per share. Although the share price
has been rather volatile since the IPO, especially since the crash
in tech stocks and the declining appetite for them, the initial
shareholders certainly achieved a highly satisfactory return. ➞
39
SCM now employs around 520 people worldwide in eight
countries across Europe, Asia and North America. Its main
customers are leading OEMs such as Apple, Dell, HP, Intel,
Motorola, Siemens-Nixdorf, Sony and Sun Microsystems.
The company also enjoys strong collaborative relationships
with industry leaders such as Sun and Microsoft.

SCM has also acquired several companies to expand its

product base and enable it to expand into new markets. Its
acquisitions include Towitoko AG, a leading supplier of smart
card-based security solutions for home banking and private
PC access in the German-speaking market, and Microtech
International, an industry-leading provider of digital photography
solutions for the consumer and business marketplaces.

■ First published in October 1999,

updated Summer 2002

40
Seagull Holding B.V.
Seagull Holding B.V.

One of the venture capitalists it had contacted called Toon

■ Activity: develops tools for the integration of legacy
applications
■ Country: The Netherlands
■ Venture capital backers: Advanced Technology
Ventures, Gilde
■ Transaction summary: US$2 million (€2 million –
conversion as of 5 September 2002) in one round
of financing
■ Exit: IPO in February 1999 on the Amsterdam
Stock Exchange (now Euronext)
Den Heijer from Gilde to find out more about Seagull.
Den Heijer in turn called Frank van Pelt, the then President
and CEO of Seagull, to find out more about the sector and
Seagull's competitors.
After a few days of further research, Den Heijer called Van Pelt
again to discuss possible venture capital funding. And soon
after Gilde purchased 17 per cent of Seagull and syndicated
the deal with Advanced Technology Ventures (ATV), which
purchased another 10 per cent of the company. Today Van
Pelt says that the venture capitalists’ contributions created
value for him, for Seagull and for its shareholders.

Seagull was founded in the Netherlands in 1990 by 17 former The involvement of US-based venture capitalists and the
employees of Holland Automation B.V., a privately held soft- network they brought with them were essential in keeping
ware company. Focused mainly on updating existing AS/400 Seagull abreast of technological and market developments in
applications, Seagull’s staff became skilled in migrating the key North American market. The venture capitalists
AS/400 applications toward client/server architectures, and in pointed out the need for a supervisory board that would take its
doing so developed desktop productivity tools, server software duties seriously and make sure that business was conducted in
and viewer technology to assist with the job. Those tools went the best interests of the company and its shareholders. Van Pelt
on to form the basis of Seagull's software product portfolio. admits that the regular quarterly board meetings and the
And within a few years, Seagull’s Windows-to-host solution accountability to the board and other shareholders often
quickly became the de facto industry standard for providing forced him to think twice about the company’s strategy, as well
an intuitive graphical interface to legacy applications. as the future of the industry and Seagull’s ability to leverage
developments in the IT sector. After a while, it became a natural
Today the company has expanded to address the mainframe reflex to ask the venture capitalists on the board for advice
legacy market and LegaSuite is the industry’s first comprehen- when far-reaching decisions needed to be made.
sive legacy evolution platform. LegaSuite includes solutions
for terminal emulation, user inter- With the encouragement of the
face extension, web-enablement, venture capitalists, Seagull strength-
standards-based application inte- Van Pelt admits that the regular quarterly ened its management and work-
gration, model-driven business board meetings and the accountability to the board force including a strategic focus on
process integration, legacy web and other shareholders often forced him the US management team. Equally
services and data stream transfor- importantly, the venture capitalists
to think twice about the company’s strategy,...
mation. And its powerful software introduced Van Pelt and Seagull to
After a while, it became a natural reflex to ask
tools integrate legacy applications the financial world and the invest-
the venture capitalists on the board for advice
with the internet world without ment community. Without them,
when far-reaching decisions needed to be made.
changes to the base application. Seagull would probably not have
completed its flotation when it did.
The initial public offering of 43 per cent of Seagull’s capital
The Venture Capital Investment took place in February 1999 on the Amsterdam Stock Exchange.
The offering valued the company at approximately €100, and
Seagull’s initial contact with venture capitalists happened was oversubscribed about ten times - a real example of venture
almost by accident. In 1995, a Seagull competitor was seeking capitalists' entry benefiting everyone involved. ➞
additional financing to boost its sales and marketing efforts
and ward off Seagull advances in the market.

41
Over 2,000 customers currently use Seagull’s solutions,
including more than 500 independent software vendors who
have incorporated them into their software applications, with
the result that Seagull’s products are in use at over 7,500
organisation worldwide. The company’s customers span an
array of industries and include AIG, AOL Time Warner,
Deutsche Bank, IBM, Merck, Toyota and several public
authorities in both the US and Europe. Seagull also has
strategic alliances with leading companies in the IT market,
including IBM, Microsoft, HP, Symbol, Sun and Citrix.

In the Summer of 2001, GrowthPlus - the pan-European

association for growth entrepreneurs - placed the company
on its list of Europe’s 500 fastest-growing companies
for the second year in a row.

In April 2001, Dan Addington, formerly COO and president,

assumed leadership of the company as CEO and president.
Seagull now employs more than 200 people worldwide,
with headquarters in the US and the Netherlands, subsidiaries
across Europe, and 30 distributors for coverage of more than
30 countries. In the Summer of 2001, GrowthPlus - the pan-
European association for growth entrepreneurs - placed the
company on its list of Europe’s 500 fastest-growing companies
for the second year in a row.

■ First published in October 1999,

updated Summer 2002

42
Soitec
Soitec

The success of the Smart Cut process - by now clearly recog-

■ Activity: produce silicon-on-insulator chips nised as an important technological breakthrough - broadened
■ Country: France Soitec’s financing options, and Soitec sought an industrial
■ Venture capital backers: Banexi Ventures (BNP) backer and partner. Soitec chose Shin Etsu Handotai (SEH) in
and Innovacom Japan, the world's leading silicon maker. In 1997, SEH took a
■ Transaction summary: FF6 million (€2.44 million) in 12.5 per cent stake in Soitec, becoming one of its major
two rounds of venture capital financing shareholders. Its investment was used to build state-of-the-art
■ Exit: IPO on the Nouveau Marché in February 1999 manufacturing facilities in Bernin, near Grenoble. But the
partnership with SEH offered many other advantages besides
financial backing. SEH had already built a second production
site in Japan, and thereby Soitec avoided additional heavy
At the Laboratoire d'Electronique et de Technologie de investment costs. And as the world's number one silicon
l'Information (LETI), the development of a key innovative maker, SEH is a guaranteed source of long-term supply in
technique for the production of silicon-on-wafer (SOI) chips substrates at preferential rates.
took about 20 years of research. Two scientists at LETI, Jean-
Michel Lamure and André-Jacques Auberton, recognised the The venture capitalists played a crucial and active role in the
potential of the new technology, and set up Soitec in 1992 to SEH negotiations. First of all, they made sure that Soitec was
commercialise it. properly valued. They also closely monitored licensing
agreements with SEH to make sure that Soitec's technology, its
This new wafer production technique, called Smart Cut, had subsequent improvements and the company's know-how
immense advantages in comparison with competing techniques: were properly protected by patents.
it reduced wafer production costs, simplified and allowed for
innovative circuit design and improved the performance of Soitec went public in 1999 in order to increase its visibility.
circuits. And the wafers it produces used less power. Soitec's When the venture capitalists first invested in the company
goal was to make Smart Cut the in 1994, Soitec was valued at
world standard, and it has But Innovacom’s involvement was more than FF45 million (€6.8 million). The
achieved this - today Soitec is the SEH participation in 1997 put that
financial: it aided the scientists, who had
world's leading manufacturer and valuation up to FF900 million
no relevant business or commercial experience,
supplier of SOI wafers, with a mar- (€137.2 million). The IPO took
in the transfer of technology and
ket share of over 80 per cent. place in February 1999 on the
an appropriate team from LETI to Soitec.
Nouveau Marché, and 30 per cent
of the company was then sold to
The Venture Capital Investment the public for FF300 million (€45.7 million). The venture
capitalists are, of course, very satisfied with the return, as are
A few years after its inception, Soitec sought venture capital to the lab technicians who took out loans to invest in the
fund its expansion and to widen and improve its product company when it was created. They saw their collective
line, and in 1994 Innovacom and Banexi Ventures became stake increase in value from and initial FF100,000 (€15,000)
Soitec’s first venture capital investors. But Innovacom’s to FF4 million (€610,000) at the IPO.
involvement was more than financial: it aided the scientists,
who had no relevant business or commercial experience, in The company intends to hold on to its leading position in
the transfer of technology and an appropriate team from LETI the market, and to help it do this it has installed additional
to Soitec. production lines in its original Bernin plant, and recently
completed construction of the industry’s largest 300mm SOI
After an additional round of funding from Banexi and Inno- wafer manufacturing facilities. This second production plant
vacom in 1995, Soitec needed more financing in 1996 for its means that Soitec can deliver more than two million 200mm
R&D programme and to create greater capacity. equivalent SOI wafers to its customers each year. ➞

43
Today Soitec’s product line includes a broad range of
advanced thin-film substrates for IC manufacturing, including
both SOI and silicon-on-quartz wafers. Soitec’s sales for
2001/2002 amounted to a total of €93.5 million - more than
double its sales of €43.3 million for 2000/2001. And Soitec’s
net earnings per share jumped from €0.07 in 2000 to €0.39
in 2001. This dramatic increase was achieved despite the
impact of a global downturn on the industry. As of 31 March
2002, the total value of Soitec’s order book was some €75
million, almost double its value one year earlier.

■ First published in October 1999,

updated Summer 2002

44
Acknowledgements
Acknowledgements

■ Members of the EVCA High Tech Committee, 2001-2003

Mr. Alex Brabers, Gimv NV

Mr. Max Burger-Calderon, Apax Partners & Co Beteiligung GmbH
Mr. Denis Champenois, Innovacom
Mr. Alan Duncan, (and Mr. Andy Allars), Prelude Technology Investments Ltd.
Mr. Michael Elias, Kennet Venture Partners Ltd.
Mr. Jim Martin, Add Partners Ltd.
Dr. Kent Hansen, INM Management Holding GmbH
Mr. Lennart Jacobsson, Swedestart Management AB
Mr. Waldemar Jantz, Target Partners GmbH
Ms. Anu Nokso-Koivisto, Sitra
Mr. Edoardo Lecaldano, Alice Ventures SRL
Mr. Denis Lucquin, Sofinnova Partners
Mr. Serge Raicher, Pantheon Ventures Limited
Mr. Neil Rimer, Index Ventures
Mr. Jean-Bernard Schmidt, Sofinnova Partners
Mr. Karl Schütte, Trinity Venture Capital
Mr. Falk F. Strascheg, Extorel Private Equity Advisers
Mr. Charly Zwemstra, NIB Capital Private Equity NV
Mr. Ere Kariola, 3i Finland OY
Mr. Javier Echarri, EVCA
Mr. Philippe Defreyn, EVCA

■ Consultant

Callie Leamy, White Page

45
Minervastraat 4, B-1930 Zaventem, Belgium
Tel: + 32 2 715 00 20 ■ Fax: + 32 2 725 07 04 ■ e-mail: evca@evca.com ■ web: www.evca.com

This EVCA Special Paper is published by the European Private Equity & Venture Capital Association (EVCA).
©Copyright EVCA September 2002