At Berlin Symposium, Start-Ups Seek Ways to Capitalize on the Net

Last week's BerlinBeta symposium allowed tech-savvy designers to mingle with venture capitalists, looking for a mutually profitable relationship.
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BERLIN -- At first glance, a European independent film festival and a seminar on Internet venture capital may not appear to have much in common.

Clapboards and clipboards, however, mingled easily at the

BerlinBeta 2.0

multimedia symposium in Germany's capital last week. Investors sought the next Big Thing, entrepreneurs looked for venture capitalists, and everyone fantasized about cashing out.

During the evenings, the festival sponsored multimedia-themed techno parties and a movie festival, but the heart of BerlinBeta was a two-day symposium where artists sat cheek-to-jowl with arbitragers. They squirmed through lectures and seminars on topics such as design, technology and funding for Internet start-ups. Nuts-and-bolts finance seminars turned out to be every bit as popular as the flashier new media and design workshops. No one, it seems, wants to be a starving artist for long.

Lectures with titles such as "Sale, Merger or IPO" and "Internet Start-ups in Germany: Is the Tightrope Walking Act Finally Over?" were packed, underscoring how quickly Europeans may be catching up to Americans in their plans to make a buck off cyberspace.

While venture capitalists and investment bankers explained the lay of the financial landscape, the industry professionals offered some of the most intriguing insights. One of the most candid admissions was that instead of hunting for local investors, it was perfectly legit to sell your baby Internet start-up to a big cash-rich American company.

More than one panelist explained that considering the potential payoff, selling to the Yanks might even be the preferable option. BerlinBeta co-founder Stephan Balzer detailed how he and his partners in the local multimedia company

LAVA

were at first conflicted about the possibility of being bought up by the Atlanta-based

iXL

(IIXL)

last year.

How Much Am I Worth Today?

But after deciding to become part of a bigger fish in a bigger pond, Balzer and his partners were more than happy with their share of the new company, which recently listed on the

Nasdaq

. "I can honestly tell you, there are few things more rewarding than waking up, logging on and seeing what difference the price has made to one's personal stake," Balzer says.

Karel Doerner, one of the people who started the German auction site

alando.de last spring only to sell it to

eBay

(EBAY) - Get Report

just three months after going online, also had good things to say about the American way. While the founders continue to run eBay's German operations, their enterprise is estimated to have fetched the six twenty-somethings more than 40 million marks ($22 million) worth of eBay stock.

Even with all of the foreign cash floating around, the participants did mention that the 1997 advent of the

Neuer Markt

, the local answer to the Nasdaq, dramatically improved local financing options as well. With the possibility of taking a company public on the Neuer Markt, German venture capitalists finally gained a viable exit strategy.

That means potential innovators don't have to battle for peanuts anymore. "I remember back in 1995 when people were desperately running around to try and get a measly 150,000 marks," commented Thomas Look, the founder of

ALTUS Media

, which specializes in streaming video for the Internet.

None of the BerlinBeta participants was convinced that conditions were anywhere near as good as they could or needed to be, however. And unfortunately, new opportunities have given rise to new problems. Indeed, some companies are now rushing to the stock market long before they are ready.

"It's like a Turkish bazaar here sometimes," said investment banker Peter Kimpel from

Goldman Sachs

. "Some companies don't even have a CFO, and others want to let their provincial lawyer from the sticks write the prospectus."

Those problems aside, most taking part at BerlinBeta 2.0 were confident that the remaining local obstacles were outweighed by the deep potential of Europe's markets. "My boss could feel it as we toured the country together," Balzer said. "There's incredible promise here. He said the biggest problem was that there just weren't enough entrepreneurs to head up the slew of desperately needed start-ups." But as the packed finance seminars showed, "that too is finally changing."