Special Paper

European Technology Success Stories

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

2

ForewordForeword

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.

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.

Max Burger-Calderon,

EVCA Chairman

Michael Elias,

Chairman EVCA High-Tech Committee

3

ContentsContents

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

5

abaXX Technology AGabaXX Technology AG

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.

abaXX’s components allow for the

development of fully customised

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. ➞

■ 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

Together with the management,the venture capital investors completely reviewed

abaXX’s business plan.

6

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.

7

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

their new business Actelion. Shortly

after the formation of Actelion, F.

Hoffmann-La Roche granted it an

exclusive license for the clinical

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,

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. ➞

Actelion Pharmaceuticals LtdActelion 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

According to Actelion’s management,the backing of this syndicate helped it

to attract key talent into the company andto generate collaborations on a corporate level.

8

According to Actelion’s management, the backing of this syn-

dicate helped it to attract key talent into the company and to

generate collaborations on a corporate level.

As a result of its acquiring the license for bosentan from

F. Hoffmann-La Roche, Actelion held a second round of

financing in March 1999. In this round, Actelion raised CHF

48 million (€30 million), comprised of CHF38 million

(€23.7 million) in equity, plus a bank credit facility. At the

time, the funding represented one of the largest amounts ever

obtained by a new biotech company in such a short period.

TVM led the round. The funds also secured the continuous

development of the company’s two clinical candidates.

Jean-Paul Clozel, Actelion’s CEO,

credits his company’s venture

capital backers with playing a key

role in its development. ‘Not so

much by providing the money,’

he explains, ‘more importantly,

Sofinnova and Atlas Venture told

us how much money we would

need and how to structure the financing. They made sure

that we would have enough to see us through and to follow

our business plan, develop our drug candidates and prepare

for the IPO. This allowed us to continue working without

being forced to sell the rights to our drugs.’ Sofinnova and

Atlas Venture, adds Jean-Paul, also helped bring other

investors into the syndicate.

Actelion’s venture capital investors received a handsome reward

for their support of the company. In April 2000, Actelion raised

close to CHF 250 million (€764.5 million) through its IPO

on the Swiss New Market Stock Exchange. At the time, the

19 times oversubscribed offering was believed to be one of

Europe’s biggest. ‘The VCs all got really good returns on their

investments,’ says Besse. ‘Along with the amount raised, the

VC backers benefited because Actelion took only a short

amount of time from initial financing to IPO.’

In September 2002, Actelion’s listing moved from the growth-

driven Swiss New Market to the SWX’s main market to widen

its investor base. The move comes as one-year (September

2001 – September 2002) market data shows Actelion’s shares

outperforming both markets for

much of the time, with gains in the

first half of 2002. With sales of

Tracleer™ exceeding forecasts for

the second quarter of 2002, Actelion

is on course to register sales of over

CHF100 million (€64 million) of

the drug this year. Tracleer™ is set

for launch throughout the EU in late 2002, with Israel,

Australia and Japan not too far behind. Judging by sales fore-

casts for Tracleer™, and with the company’s continuing

research into new drugs, shareholders may expect the good

returns to continue.

Jean-Paul Clozel, Actelion’s CEO,credits his company’s venture capital backers

with playing a key role in its development.‘Not so much by providing the money,’

he explains.

9

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

the World Skiing Championships in

Switzerland in 1999. The program

allows for the comparison of two

athletes by superimposing one over

the other on the same background.

Building on this technology, the

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 CapitalInvestment

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. ➞

DartfishDartfish

■ 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

All of our venture capital investorshave ensured proper governance,

and they oversee our activities and plansto make sure that the business is run well -

and in the right direction. They ask the questionsthat we should be asking ourselves.

10

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.’

11

Detection Technology OyDetection Technology Oy

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

international expansion in 1993

with a co-operation agreement with

Tsinghua University in Beijing, and

later established a subsidiary there

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. ➞

■ 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

But when the company decided to changeits business model in 1998 and pursue

an ambitious growth plan, management… lookedto venture capital backers for assistance.

12

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.’

13

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.

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). ➞

Genmab A/SGenmab 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

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 againto at least 180 by the end of 2002.

14

In June 2000, Genmab raised an unprecedented sum of venture

capital funding - approximately DKK 322.6 million (€43.3

million). At the time this was considered the largest funding

round to date for a European biotech. This financing round

was led by Index Ventures of Geneva and included Apax

Europe and Lombard Odier Immunology Fund, as well as

Genmab’s existing investors.

From the very beginning, BankInvest’s involvement has been

crucial to Genmab. ‘BankInvest helped create this company,’

says Zeuthen proudly. In addition to assisting Medarex in

hammering out the company’s structure and then launching it,

BankInvest also helped recruit Genmab’s first Board of

Directors, its Scientific Advisory Board and key members of

Genmab’s management team. BankInvest has also con-

tributed significantly to the company’s development through

its participation on the board and Zeuthen’s position as a

Member of the Board since Genmab’s inception and

Chairman of the Board since 2000.

BankInvest has also opened doors for Genmab by helping it

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.

In a little more than a year and a half from its inception,

Genmab successfully completed an IPO. In October 2000

the company listed simultaneously on the Copenhagen Stock

Exchange and on the Neuer Markt in Germany, raising

approximately DKK 1.6 billion (€214 million). The venture

capital backers then exited Genmab in October 2001,

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-

rent CEO, this was a rational decision, as more than 95 per

cent of the trading in the company’s stock has taken place on

the Copenhagen Stock Exchange since its IPO, and she says:

‘By eliminating the duplication in financial reporting that

comes with a double listing, Genmab will gain considerable

cost savings.’

Today Genmab is Europe’s fifth largest biotech company and

presently ranks among the world’s top 50 biotech companies

by market capitalisation.

In addition to assisting Medarex in hammering outthe company’s structure and then launching it,

BankInvest also helped recruit Genmab’s first Board ofDirectors, its Scientific Advisory Board and key members of

Genmab’s management team.

From the very beginning, BankInvest’s involvementhas been crucial to Genmab. ‘BankInvest helped create

this company,’ says Zeuthen proudly.

15

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

produced more than 100 designs.

The military market was the main

initial target for GIGA’s products,

until demand in that sector fell

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. ➞

Giga A/SGiga 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)

But the turning-point for the company camewhen the investors recruited Helmer,

and as GIGA was a small company, the venturecapital backers provided access to vital support

in accounting and legal matters.

16

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).

17

Jean-Loup Romet-Lemonne founded IDM SA in 1993. ‘It was a

difficult area to go into because the trend at the time was to

open biotechs that focused on gene therapy,’ recalls Romet-

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

could be increased if more were known about the interaction

of cells.

From the time IDM was established, it took three more years

for cell therapy research to take off world-wide. 1996 saw

a 322 per cent increase - up to US$65.8 million (ECU 81.8

million) - in world-wide revenues for

the cell therapy industry over the

previous year. ‘We were pioneers

in this field,’ says Romet-Lemonne

proudly, ‘It was only at the end of

1996 that the scientific community

really began moving in the direction

of cell therapy. In the beginning we

were swimming against the scientific

tide in trying to prove that monocytes - mature white blood

cells - could produce these useful cells to fight disease.’

The main target of IDM’s technology is cancer, and its pro-

prietary technology is based around the extraction and culturing

of monocytes. The monocytes are then treated with a cytokine,

which enhances their ability to react with diseased cells, and

re-injected into the body. This allows for greater control over

the disease treatment process, and products derived from this

technology have been shown to be less toxic than many

other forms of cancer treatment. Using the technology, IDM

developed two new families of immunotherapeutic agents

called Cell Drugs™, which either kill tumours or act as

‘cancer vaccines’, fighting disease by stimulating an immune

response in the patient. IDM currently has one of its products

in phase III trials and four in phase II.

Since 1993 IDM has grown from a one-man start-up in Paris to

117 staff in France and in representative offices in Canada and

the US. The company has also forged several strong partner-

ships both with big pharmaceutical companies and biotech

firms. IDM’s most recent alliance agreement - with Sanofi-

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

to ten of IDM’s drugs during the first five years, and two per

year for another five years. IDM also has collaboration

agreements with Medarex, Oxford BioMedica and Stedim.

The Venture Capital Investment

At first, Romet-Lemonne ran into some difficulties when looking

for seed money for IDM. He recalls: ‘No-one wanted to invest

in early stage biotech companies in France in 1993, because

there were few exit possibilities - the Nouveau Marché was not

around then.’ He finally found funding outside of France -

Musuri, a family-owned private

equity fund in Spain, and American

life sciences company Medarex

together invested FF3 million

(€457,000 – conversion as of 5

September 2002) in IDM in 1993.

Two years later in March 1995,

Sofinnova invested FF4 million

(€610,000 – conversion as of 5 September 2002) in IDM.

And once the market for cell therapy took off in 1996, it

became easier for IDM to find backers. In early 1997 Apax

Partners, Atlas Venture, Banexi, CDC Innovation and

Sofinnova invested FF37 million (ECU 5.6 million) in a

financing round, and 18 months later IDM raised another

€16 million in a private placement. ➞

IDMIDM (Immuno-Designed Molecules)

■ Activity: development and production of

cell therapy drugs

■ Country: France, Canada, USA

■ Venture capital backers: Alta Partners, Apax

Partners, Atlas Venture, AXA Private Equity, Banexi,

Bank Vontobel, Biotechnology Turnaround Fund,

BNP, Caisse de Pensions du Cern, CDC Innovation

Partners, Clal Biotechnology Industries, Compagnie

Lebon, IMH, Medarex, Musuri, Paribas, Pechel

Industries and Sofinnova

■ Transaction summary: approximately €66 million

in seed money, further venture capital financing

rounds and a private placement

Since 1993 IDM has grown from a one-manstart-up in Paris to 117 staff in France and

in representative offices in Canada and the US.The company has also forged several strongpartnerships both with big pharmaceutical

companies and biotech firms.

18

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.’

19

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.

Using light waves and operating at a

top transmission speed of 155 Mbps,

LaserBit’s devices offer several

advantages over most other means

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 CapitalInvestment

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.’ ➞

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

The venture capital companies also providegood leads and information about the market and

the company’s competitors, which Koenig sayshave helped LaserBit formulate its strategy.

20

‘HITF was also involved in encouraging LaserBit to hire the

right people’. Says Skrobiszewski: ‘We were very focused on

helping our manager-founders to build their organization,

and eventually, when the time was right, we worked with

them and the second round investors to identify and hire a

seasoned international executive as the new CEO for the

business.’

And on the strength of the business

plan and information memo pre-

pared with the help of HITF, com-

bined with the promise of its future

potential, LaserBit was able to close a second round of

financing just months later, in December 2000. During this

round, Intel Capital, Sandler Capital and Technologieholding

CEE Funds advised by 3TS Venture Partners invested US$6

million (€6.7 million) in three equal tranches. The company

expects to close another round of financing in 2003.

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.

‘Clearly the company enjoys a high level of board involvement

from the venture capitalists, including the necessary oversight

and discipline in terms of business plans. And, of course,

they have brought forward candidates for key positions,’ says

Koenig. The venture capital companies also provide good

leads and information about the market and the company’s

competitors, which Koenig says

have helped LaserBit formulate its

strategy. And they have assisted the

company's growth in several other

practical ways, including introducing

LaserBit to potential partners and

helping to fine tune its sales pitches. As a result of a meeting

arranged by 3TS between LaserBit and Orange Slovakia, the

two companies are now working on a test trial of LaserBit’s

products for use in the Orange network. ‘We try to use our

regional and telecoms contacts to open doors for LaserBit;

connecting them with another of our investments in Orange

Slovakia was helpful to both,’ comments Daniel Lynch of 3TS.

As a result of a meeting arranged bythe VC (3TS) between LaserBit andOrange Slovakia, the two companies

are now working on a test trial.

21

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,

and permits access to both simple

and complex molecules similar to

those found in nature.

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

a very large matrix of 1020 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. ➞

Morphochem AGMorphochem 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

The founders quickly realised that theywould need substantial cash resources to make

the leap from a small biotech service provider intoa fully integrated drug discovery company.

22

To finance the company’s acquisitions and expansion abroad,

Morphochem closed a third financing round in July 2000.

Besides further investment from all its existing backers,

Morphochem also attracted a host of new investors, and the

funds raised amounted to €40.7 million. To secure sufficient

funding, Morphochem closed a fourth round in July 2001,

raising another €15 million, which, due to the recent restruc-

turing of Morphochem, will easily take it into July 2004.

The practical help of Morphochem’s

venture capital partners has played a

vital role in the company's growth

from a small German operation into

an international group with approxi-

mately 100 employees spread

across offices in Munich, Basel, Switzerland and Monmouth

Junction, New Jersey.

In early 2000, with the assistance of TVM, Morphochem

acquired Small Molecule Therapeutics Inc. (SMT) in New

Jersey. ‘The acquisition of SMT was actually suggested by an

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.

Through their representation on Morphochem’s board, the

venture capital backers also act as a sounding board for

management’s ideas and strategies. And Morphochem also

has access to the venture capital companies’ industry experts

any time they need them.

Loeser credits the strong international reputation of Morpho-

chem’s initial investors with enabling the company to ‘further

build an industry-experienced,

long-term committed syndicate.’

Loeser continues: ‘In the second

round we attracted Jean Deleage of

Alta California Partners, one of the

most well-respected personalities in

international biotech circles. And

with him on board we were able to expand our syndicate

into the US, one of the most dominant pharmaceutical markets.

We very much appreciate the close relationship and mutual

understanding we have with our venture capital partners, as

their back-up in these difficult markets of 2002 becomes

increasingly invaluable day by day.’

The practical help of Morphochem’sventure capital partners has played a vital role

in the company's growth from a smallGerman operation into an international group.

23

No Wires NeededNo Wires Needed

No Wires Needed (NWN) was born on the campus of the

University of Twente (UT) in the Netherlands in 1992.

Enamoured with the internet, five students - Ron Brockmann,

Remi Blokker, Maarten Hoeben, Arnoud Zwemmer and Andre

Blum, the majority of whom studied at UT - envisioned a day

when the web would be available everywhere. Wireless

solutions, they concluded, was how it could happen.

The students started out by studying the wireless local area

network (WLAN) standard IEE802.11 (also known as Wi-Fi)

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

codes and problems,’ says Hans van der Hoek, the compa-

ny’s former CEO, when detailing the company’s genesis.

At the time, wireless solutions were impractical because of

the costs involved, but NWN got a lucky break: By the time

the students graduated in 1997, powerful low-voltage silicon

chips had fallen in price. This in

turn made the use of wireless solu-

tions more possible, as it allowed

for the creation of cost-acceptable

wireless infrastructures and PC

cards.

NWN’s first major market break-

through was its development of an

11-megabit per second WLAN solution - the first of its kind -

which the company began shipping in the summer of 1999.

From then on, NWN continued rolling out its solutions.

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

Cisco, 3Com, Compaq and Dell - began to venture into the

wireless arena. ‘That is when the market really started moving,’

recalls van der Hoek.

Thanks to its expertise and its head start in the wireless field,

NWN quickly became an established industry leader in wireless

solutions that provided connections to broadband communica-

tions in homes, small offices and across corporate complexes.

The company also developed advanced encryption software

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

anything else that was on the market. Van der Hoek explains,

‘Even today there are issues with Wi-Fi security. NWN’s MAC

systems have always been much more advanced and more

secure than those of its competitors.’

NWN’s success meant a jump in revenues, and the company

saw a ten-fold increase in sales from 1998 to 1999. Employee

numbers also rose, and by 2000 the company had about 60

people working for it in its facilities in Bilthoven (Netherlands)

and offices in Menlo Park and Coventry (UK).

The Venture Capital Investment

The company managed to survive its first five years on small

investments of cash and equipment, such as computers, from

family members and friends. But upon graduating from

university, the founders began looking for venture capital to

jump-start the company's operations on the world stage.

As not all investors understood the

potential of wireless solutions yet,

this was not an easy task.

Recognizing the company's poten-

tial, but considering its early stage,

Gilde IT Fund provided €250k

seed financing in early 1998 and

committed further financing based

on milestones. It then worked with the company to recruit an

experienced CEO. This resulted in a €2.2 million financing

round in October of 1998, provided by Gilde and Parnib

Converging Technologies, together with private investors. ➞

■ Activity: developing WLAN and other wireless

solutions

■ Country: The Netherlands

■ Venture capital backers: 3Com, Gilde IT Fund,

Kennet Capital, Parnib Converging Technologies

and private investors

■ Transaction summary: US$8 million (€7.6 million)

in two rounds of venture capital financing

■ Exit: trade sale by Intersil in 2000 for approximately

US$149 million (€158 million) in a share swap

The company managed to survive its first five yearson small investments of cash and equipment, suchas computers, from family members and friends.

But upon graduating from university, the foundersbegan looking for venture capital to jump-start

the company’s operations on the world stage.

24

‘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.’

25

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 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. ➞

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

Novuspharma’s venture capital investorsplayed a crucial role in the company’s genesis.

26

‘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.

‘This was an unusual situation, Novuspharma only needed oneventure capital injection before going public.’

27

Tiscali S.p.ATiscali S.p.A

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

quickly followed Tiscali’s lead and

began offering free internet access

as well. Tiscali’s brave move had a

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. ➞

■ 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

Tiscali's continuing drive to become a dominantpan-European player has been reflectedby the series of acquisitions it has made

throughout Europe since the beginning of 2001.

28

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.

29

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.

30

31

Dr Solomon’s Group PlcDr Solomon’s Group Plc

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.

With the rapid growth of the PC

market, and the inevitable viruses

accompanying it, S&S International

expanded quickly. In 1991, a stake

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

■ 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

Their first break came when the Lotus 1-2-3spreadsheet programme was launched in the UK.The Lotus software contained some errors, andAlan wrote another programme to correct these.

32

33

Flomerics Group PlcFlomerics Group Plc

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.

Flomerics’ first product, FLOTHERM

Version 1.2, became available in

September 1989 for use by elec-

tronic engineers. And by the late

1990s, it had been adopted by

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. ➞

■ 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

Initially Flomerics operated as a partnership,but in order to develop the product fully

and grow the business, the founders realisedthat they would need to expand by raising

venture capital backing.

34

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.

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

Flomerics continues to enjoy the reputation of market leaderand innovator and has become an international leader

in the field of virtual prototyping.

35

Innogenetics N.V.Innogenetics N.V.

Wanting to establish a new biotechnology company focused

on DNA-based diagnostic products, Rudi Marien and Hugo

Van Heuverswyn founded Innogenetics in 1985. Marien had

experience as an entrepreneur in the pharmaceutical industry,

while Van Heuverswyn, one of the top biogenetic scientists at

Ghent University, was interested in taking advantage of the

possibilities that were opening up in the field of new diagnostic

products.

Innogenetics began developing

diagnostic kits for HIV testing, and

products for other disease areas grew

out of the initial success of this

product line. Today its therapeutics

division targets two disease areas -

Hepatitis C and immune disorders

- while its diagnostic research

focuses on infectious diseases,

neurodegeneration and genetic predispostion testing. Phase II

clinical trials of Innogenetics’ vaccine against hepatitis C now

taking place are showing positive results and the business

also has two new pre-clinical programs underway.

The Venture Capital Investment

In the beginning, the company’s founders planned to generate

cash flow by selling diagnostic equipment, which would in

turn fund the research and development of diagnostic and

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

therapeutic products, GIMV decided to put up BEF25 million

(€620,000 – conversion as of 5 September 2002) in the first

round in exchange for 25 per cent of the equity. The remaining

funds were obtained from the founding team, business

angels and loan financing.

As is typical with rapidly-expanding pharmaceutical companies,

Innogenetics had a huge demand for cash, and this need

escalated in 1988. This meant that new investors had to be

found, and GIMV played an instrumental part in bringing them

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'

flotation on Easdaq, now Nasdaq Europe.

Dirk Boogmans, now the CEO of GIMV, was at the time

responsible for GIMV’s investment in Innogenetics, and worked

as one of two managers on the project. Dirk also took a seat on

Innogenetics’ board, advised on strategy decisions and acted

as a sounding board for management’s plans. As Innogenetics

grew, he also helped with an employee stock option plan and

finally advised the company on its listing on Easdaq, now

Nasdaq Europe.

Innogenetics became one of the

first companies to float on Easdaq,

listing in November 1996. The IPO

raised €79 million and gave Inno-

genetics a market capitalisation of

€210.8 million.

In early 2000, Innogenetics appointed a new CEO, Philippe

Archinard, former corporate vice president of BioMérieux to

improve the company’s strategy. Archinard’s goal was to

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

diagnostic business broke even in 2001 and is expected to be

profitable in 2002. For 2001 the company also announced a

49 per cent reduction in its operational loss and a 30 per cent

increase in its total revenues to €59.1 million, largely due to

its commercialisation agreements with Bayer and Roche. ➞

■ Activity: discovery and development of diagnostic

and therapeutic products

■ Country: Belgium

■ Venture capital backers: Alta Berkeley Venture Partners,

Baring Hambrecht Ventures, Eurocontinental

Ventures, GIMV, JAFCO and Kredietbank

■ Transaction summary: €21 million in two financing

rounds and private placements

■ Exit: IPO on Easdaq (Nasdaq Europe)

in November 1996

In the beginning, the company’s foundersplanned to generate cash flow by selling

diagnostic equipment, which would in turn fundthe research and development of diagnostic and

therapeutic products. But to get the company upand running they needed financing.

36

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.

■ First published in March 1997,

updated July 2002

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.

37

Maconomy A/SMaconomy A/S

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

too restrictive, so in the mid 1990s

the company launched UNIX server

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

■ 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

In 2002 Maconomy has gained fresh impetusfor growth through partnerships with leading

consulting firms in the Netherlands and Sweden.

38

39

SCM Microsystems, Inc.SCM Microsystems, Inc.

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

the margins in the market would

eventually become unsustainable.

That move was a masterstroke.

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. ➞

■ 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

SCM needed more financing before going publicin 1997, and it was able to attract funding

from venture capitalists, as well ascorporate strategic investors.

40

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

41

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

Seagull was founded in the Netherlands in 1990 by 17 former

employees of Holland Automation B.V., a privately held soft-

ware company. Focused mainly on updating existing AS/400

applications, Seagull’s staff became skilled in migrating

AS/400 applications toward client/server architectures, and in

doing so developed desktop productivity tools, server software

and viewer technology to assist with the job. Those tools went

on to form the basis of Seagull's software product portfolio.

And within a few years, Seagull’s Windows-to-host solution

quickly became the de facto industry standard for providing

an intuitive graphical interface to legacy applications.

Today the company has expanded to address the mainframe

legacy market and LegaSuite is the industry’s first comprehen-

sive legacy evolution platform. LegaSuite includes solutions

for terminal emulation, user inter-

face extension, web-enablement,

standards-based application inte-

gration, model-driven business

process integration, legacy web

services and data stream transfor-

mation. And its powerful software

tools integrate legacy applications

with the internet world without

changes to the base application.

The Venture Capital Investment

Seagull’s initial contact with venture capitalists happened

almost by accident. In 1995, a Seagull competitor was seeking

additional financing to boost its sales and marketing efforts

and ward off Seagull advances in the market.

One of the venture capitalists it had contacted called Toon

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.

The involvement of US-based venture capitalists and the

network they brought with them were essential in keeping

Seagull abreast of technological and market developments in

the key North American market. The venture capitalists

pointed out the need for a supervisory board that would take its

duties seriously and make sure that business was conducted in

the best interests of the company and its shareholders. Van Pelt

admits that the regular quarterly board meetings and the

accountability to the board and other shareholders often

forced him to think twice about the company’s strategy, as well

as the future of the industry and Seagull’s ability to leverage

developments in the IT sector. After a while, it became a natural

reflex to ask the venture capitalists on the board for advice

when far-reaching decisions needed to be made.

With the encouragement of the

venture capitalists, Seagull strength-

ened its management and work-

force including a strategic focus on

the US management team. Equally

importantly, the venture capitalists

introduced Van Pelt and Seagull to

the financial world and the invest-

ment community. Without them,

Seagull would probably not have

completed its flotation when it did.

The initial public offering of 43 per cent of Seagull’s capital

took place in February 1999 on the Amsterdam Stock Exchange.

The offering valued the company at approximately €100, and

was oversubscribed about ten times - a real example of venture

capitalists' entry benefiting everyone involved. ➞

■ 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)

Van Pelt admits that the regular quarterlyboard meetings and the accountability to the board

and other shareholders often forced himto think twice about the company’s strategy,...After a while, it became a natural reflex to askthe venture capitalists on the board for advice

when far-reaching decisions needed to be made.

42

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 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

In the Summer of 2001, GrowthPlus - the pan-Europeanassociation for growth entrepreneurs - placed the company

on its list of Europe’s 500 fastest-growing companiesfor the second year in a row.

43

SoitecSoitec

At the Laboratoire d'Electronique et de Technologie de

l'Information (LETI), the development of a key innovative

technique for the production of silicon-on-wafer (SOI) chips

took about 20 years of research. Two scientists at LETI, Jean-

Michel Lamure and André-Jacques Auberton, recognised the

potential of the new technology, and set up Soitec in 1992 to

commercialise it.

This new wafer production technique, called Smart Cut, had

immense advantages in comparison with competing techniques:

it reduced wafer production costs, simplified and allowed for

innovative circuit design and improved the performance of

circuits. And the wafers it produces used less power. Soitec's

goal was to make Smart Cut the

world standard, and it has

achieved this - today Soitec is the

world's leading manufacturer and

supplier of SOI wafers, with a mar-

ket share of over 80 per cent.

The Venture Capital Investment

A few years after its inception, Soitec sought venture capital to

fund its expansion and to widen and improve its product

line, and in 1994 Innovacom and Banexi Ventures became

Soitec’s first venture capital investors. But Innovacom’s

involvement was more than financial: it aided the scientists,

who had no relevant business or commercial experience, in

the transfer of technology and an appropriate team from LETI

to Soitec.

After an additional round of funding from Banexi and Inno-

vacom in 1995, Soitec needed more financing in 1996 for its

R&D programme and to create greater capacity.

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

nised as an important technological breakthrough - broadened

Soitec’s financing options, and Soitec sought an industrial

backer and partner. Soitec chose Shin Etsu Handotai (SEH) in

Japan, the world's leading silicon maker. In 1997, SEH took a

12.5 per cent stake in Soitec, becoming one of its major

shareholders. Its investment was used to build state-of-the-art

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

investment costs. And as the world's number one silicon

maker, SEH is a guaranteed source of long-term supply in

substrates at preferential rates.

The venture capitalists played a crucial and active role in the

SEH negotiations. First of all, they made sure that Soitec was

properly valued. They also closely monitored licensing

agreements with SEH to make sure that Soitec's technology, its

subsequent improvements and the company's know-how

were properly protected by patents.

Soitec went public in 1999 in order to increase its visibility.

When the venture capitalists first invested in the company

in 1994, Soitec was valued at

FF45 million (€6.8 million). The

SEH participation in 1997 put that

valuation up to FF900 million

(€137.2 million). The IPO took

place in February 1999 on the

Nouveau Marché, and 30 per cent

of the company was then sold to

the public for FF300 million (€45.7 million). The venture

capitalists are, of course, very satisfied with the return, as are

the lab technicians who took out loans to invest in the

company when it was created. They saw their collective

stake increase in value from and initial FF100,000 (€15,000)

to FF4 million (€610,000) at the IPO.

The company intends to hold on to its leading position in

the market, and to help it do this it has installed additional

production lines in its original Bernin plant, and recently

completed construction of the industry’s largest 300mm SOI

wafer manufacturing facilities. This second production plant

means that Soitec can deliver more than two million 200mm

equivalent SOI wafers to its customers each year. ➞

■ Activity: produce silicon-on-insulator chips

■ Country: France

■ Venture capital backers: Banexi Ventures (BNP)

and Innovacom

■ Transaction summary: FF6 million (€2.44 million) in

two rounds of venture capital financing

■ Exit: IPO on the Nouveau Marché in February 1999

But Innovacom’s involvement was more thanfinancial: it aided the scientists, who had

no relevant business or commercial experience,in the transfer of technology and

an appropriate team from LETI to Soitec.

44

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

■ 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

AcknowledgementsAcknowledgements

45

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