The technology industry has had an uneasy relationship with venture capitalists ever since they talked up some of the more delinquent dot.coms, only to walk away virtually unscathed when it became apparent that 99% of VC ‘punts’ in the high-tech sector were ‘pups’. Yet while it is easy to depict VCs as hardball capitalists with no regard for anything other than themselves and their bank accounts, it is worth recalling that many of the dot.com wannabees, at first smitten and later smashed by this relatively new source of investment finance were in it for all they could get, too.

Venture or vulture?
While the debate continues to swirl around the true motives of VCs, the role which they play in the ICT sector is moving on from the era of piddling ‘rubbish bets’ on piddling ‘rubbish dot.com start-ups. In some respect, the VCs are now the only game in town when it comes to refinancing or even re-energising survivors in a technology landscape still pock-marked by the mass graves in which the burned fingers of small investors are now interred. Institutions, too, who for so long treated sectors such as telecom as a safe banker for the ‘widows and orphans’ that their funds were supposed to protect, have adopted an ultra-cautious approach accompanied by hissed accusations of ‘betrayal’.

Against this backdrop, individual VCs can still be seen to live somewhere on a scale which has at its extremes the ‘venture’ (risky investments, business experience, public seal of approval) or ‘vulture’ (asset-stripping, leveraging, unholistic, short-term and selfish) characteristics of capital investment. Some feast on corporate carrion, while others seem determined to make a difference and thus justify their return on investment.

The telecom industry will be loathe to admit it after up to a century of organic and self-sustaining development (if you ignore the odd monopoly here, or the occasional subsidy there), but things have changed. VCs are now filling a vacuum left by the retreat from direct investment by telcos, while the latter still lick their wounds.

Two classes of example should be enough to make this clear:
• over the last 18 months, the major international satellite organisations (ISOs), once owned on a collective-share basis under treaty terms by governments and their flag carriers, have passed into VC ownership. The telcos and their political masters lost enthusiasm for this ‘mature’ technology and its systems after the repeated failure of a series of quite ambitious (that means ‘greedy’) IPOs and the realisation of the need to continue to invest in these systems.
• in the same timeframe, ailing second carriers such as Wind (in Italy ) and Auna (in Spain), formed by national infrastructure owners in fields such as energy alongside overseas telco intent on pan-European domination have had their calls for transformation answered only by VC groupings. For more than a decade, telcos scrambled to gain footholds in new markets via these new entrants. Now, the telcos are nowhere to be seen and the VCs are fighting it out among themselves for control. The fights are real enough too, pushing up target prices in increments of €1bn typically. It a seller’s market, but one in which no buyers come from anywhere except the VC community.

Some will still not be happy with this turn of events. The vulture’s profile is never far from the ‘front of stage’, especially in the minds of the workforces involved. Others will not like the fact that VCs are overwhelmingly American in origin. But the sense of ‘venture’, of a speculative but determined gamble, is there too. Never forgetting that the ‘un(ad)venturous’ European telcos have walked away in the meantime.

Sing along?
Maybe the last appropriate words on this come from the song that inspired the headline to this story:
“Though I see the danger there,
If there is a chance for me, then I don’t care.”
Well the VCs do care, of course, about themselves and their investments. And so the rest of us should be watching what they care about, and perhaps taking notes. Unlike the case with the dot.coms, these bigger gables come with  shorter odds.
Jim Chalmers