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EVolution pursues fittest ventures

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Few venture capital firms have started with as much of a focus on international b-to-b as has eVolution Global Partners L.P., which was founded earlier this year with $100 million from U.S.-based firms Bain & Co., Kleiner Perkins Caufield & Byers and Texas Pacific Group. London-based eVolution's model is to help big corporations leverage their assets to build stand-alone Internet companies.

EVolution's first investment, placed in July, was in LevelSeas.com, an ocean freight e-marketplace backed by BP Amoco plc, Cargill Inc., Royal Dutch/Shell Group of Cos. and Clarksons. The firm intends to make up to 20 investments over the next year.

In this Q&A, eVolution Managing Director David Sanderson, who previously headed up Bain & Co.'s e-commerce practice, comments on international VC investing.

BtoB: The Europe and Asia markets are slowing and investors are regarding b-to-b start-ups with greater scrutiny. How is eVolution looking at its non-U.S. investments differently?

Sanderson: I would suggest that the opportunities are better now than they were eight months ago. I know that's a bit contrarian. The prices people were paying eight months ago to get involved with VC in Europe were a bit high. There was a problem, an imbalance. From a standpoint of buying in at a traditional price, today is much better.

Plus, we are focused on corporate venturing. And that is a sweet spot, to take advantage of assets built by traditional companies over many years. Many start-ups, traditionally, did not have corporate assets behind them. But this has been happening in the U.S. now for 10 months. And now European companies are looking to take advantage of the assets in their businesses. What we're looking to do there is build out from an existing platform instead of having to compete from scratch.

BtoB: What could stop the success of U.S. b-to-b VCs in Europe?

Sanderson: The most important thing here is having local market knowledge. Clearly, there is much to be learned in the U.S. that has applicability in the local markets. What's not as transparent, though, is the network factor. If you need a great CFO in Paris, your network in Silicon Valley is not going to be applicable.

A good network is local in the venture community. You need to be able to get an 'A team' for your effort, people who can bring resources to the table quickly. And that's not an easy thing to do.

Having that local capability is critical to success in non-U.S. venture capital. Just transporting executives from the U.S. to Europe is not enough to make a venture in Europe successful.

You also need to understand that Europe is a very different market with regard to regulatory issues, tax issues, all sorts of things. And remember that there will be market cycles in Europe, just as there are in the U.S. The important thing is putting all the right factors into place to create a success.

BtoB: On what regions and countries outside the U.S. are you placing the most emphasis, and why now?

Sanderson: Initially our emphasis will be on Europe, primarily because it's a big market and had been about six months behind the U.S. in b-to-b opportunities. Now it is pretty ripe for a broad set of b-to-b businesses. Next will be Asia. We're looking at it as a significant opportunity, albeit an opportunity not quite as large as Europe. Overall, we do feel that a global footprint is critical right out of the blocks.

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