I’ve written in the past on the perverse effects that these taxpayer-funded structures can have on the venture capital sector.  And for full disclosure, a significant percentage of Truffle’s funds under management are in the form of FCPIs, whose closest resemblance in Europe would probably be the UK’s VCT structure.

{As a reminder, an FCPI, or fonds commun de placement à risque, is a French fund vehicle managed by venture capital firms with a requirement to invest in innovative technology companies.  An FIP, or fonds d’investissement de proximité, is a French fund vehicle that requires investment in a specific region of France.  Both vehicles raise their funds from taxpayers who are in turn offered a substantial tax credit on their income tax, wealth tax, or both}.

The article reveals the preponderant role that distributors play in the annual collection of these vehicles.  All it takes is one or two large distributors to change partners, and any given fund management company or VC firm can shift from having a banner fundraising year to falling off the map.

I’ll explore this perverse distribution game another time, but in the meantime, invite you to read the full article here (subscription required, though a free trial is sometimes available).

For me, however, the money shot of the article is a citation from an anonymous professional of the sector:

« Les ratios, délais et contraintes de toutes sortes se sont multipliés, selon qu’il s’agit d’un FIP ou d’un FCPI, d’un fonds ISF ou IR.  Un véhicule fiscal peut désormais devoir satisfaire simultanément jusqu’à quatorze obligations différentes, voire contradictoire. »

Roughly translated: [The ratios, deadlines, and myriad investment constraints governing these fund structures have ballooned.  Such vehicles nowadays often find themselves in a situation of having to satisfy up to 14 different investment constraints concurrently, some of which can even be contradictory.]

This is unhealthy.  As we’ve witnessed with the U.S. tax code, legal complexity combined with high stakes benefits the lawyers not the entrepreneurs.

Bogle’s investment values center on favoring the little guy, the individual investor who doesn’t have the capital nor the advanced trading technologies that are at the disposal of professional traders and investment banks.

By lashing out yesterday against the tax rate on carried interest, Bogle remains classically true to form in leveling the playing field for the average joe.  “Carried interest is a bit of a technical fraud,” as he says.

The debate about the tax on carried interest has surged in the U.S. thanks to revelations that potential Republican presidential candidate Mitt Romney paid an overall effective tax rate of less than 14% in 2010.  One of the principal reasons that Romney, whose income was in the tens of millions, paid such a low effective rate is the fact that most of his income came in the form of carried interest from his time at Bain Capital, which was taxed at the long-term capital gains rate of 15%.

I admire John Bogle.  Just as he saw the 2~5% annual management fees on actively-managed mutual funds as a hoodwinking of the public, he exposes the low carried interest tax as a fiscal boondoggle to most private equity and VC general partners who are investing other people’s money.

Perhaps as a VC myself, I should fall firmly on the side of keeping the carried interest tax at rock-bottom.  However, I have two major objections to not raising it substantially.  First, financially, I am not in the same boat as GPs in the U.S.  The effective carried interest tax in France is over 30% when counting all auxiliary social charges.  Moreover, as a U.S. citizen with a French salary, I am paying tax to two countries, setting my cumulative effective income tax rate at an obscene 67%.  So Romney pays 14%; I pay a whopping two-thirds.  I find this infuriating.

Even more importantly, however, giving carried interest a tax break is totally unfair.  Carried interest is essentially a fee paid for managing other people’s money.  This fee happens to be based on performance, but it is a fee nonetheless.  The logic of rewarding investment risk with a lower tax rate is not relevant for a GP whose carried interest income is by and large pure gravy (granted, with a tad of personal investment, but this is extremely limited).

Fred Wilson presents a third compelling argument that taxing carried interest as ordinary income is good policy.  I encourage you to read Fred’s post if you haven’t seen it.

Perhaps it took a circus of in-fighting in the U.S. Republican primaries to bring this issue to light, but I am glad that the media and the public are taking notice.

]]> http://markbivens.com/m/archives/bogle-on-carried-interest/feed 2 http://markbivens.com/m/archives/frances-chopra-moment http://markbivens.com/m/archives/frances-chopra-moment#comments Mon, 13 Feb 2012 19:30:29 +0000 mark http://markbivens.com/m/?p=726 It has been interesting to follow the recent transatlantic flap triggered by Ilan Abehassera’s interview in Betabeat.

Abehassera denigrated the French entrepreneurial scene in a piece that oozed of auto-pr; Liam Boogar of Rude Baguette called b.s. In reality, I suspect both individuals were viewing the same market but through the lenses of different eras.

The brouhaha fizzled before it became exciting, mostly because Boogar refused to play the tit-for-tat game. Which is admirable, though I would have liked to see some fisticuffs on this issue, because there’s clearly a departure underway now from the traditional stereotypes about tech entrepreneurship in France clung to by Abehassera that is a very recent but indisputable phenomenon.

I’ve been a tech VC in Paris for ten years now, and I submit that we’re now enthusiastically witnessing the Deepak Chopra moment for the French entrepreneurial scene. In other words, French entrepreneurship seems to be finally breaking out of the karmic cycle of risk-aversion, underinvestment, and narrow ambitions (Chopra is notorious for exhausting the metaphor of kundalini teachings in business world applications, but if you’re not convinced, read: The Seven Spiritual Laws of Success). But you have to be on the ground here to detect this phenomenon, trust me.

The new generation of French entrepreneurs are breaking the mold. Every single finalist of the Founders Institute program — and every member of Le Camping I’ve met — pitches a well thought-through yet audacious venture with global ambitions reminiscent of what I heard in Silicon Valley in the 90s. First-time teams that have failed make strategic pivots and try again. French co-founders of bay area companies return to France for their second or third ventures (yes, it really happens). I even know of a few cases of Americans moving to Paris to start their tech companies. Granted, a lot of this evidence is anecdotal, but stories like these were unheard of five years ago, even eighteen months ago.

The government, on which the French often instinctively rely to take the lead in innovation, is stepping up in it’s role too. Between record Oseo subsidy grants, the newly-formed Fonds National d’Amorçage (the new 400m€ state-sponsored seed fund-of-funds), and it’s continued support (for the moment) of the tax-break-incentivized investment vehicles like FCPIs, FIPs, and ISF Holdings, early-stage capital is flooding the market. Does France’s legal framework around labor law leave room for improvement ? Of course. But this double-edged sword has benefits. For example, with programs like the Accre, unemployed workers can receive an advance of 50% of their 23-months of unemployment benefits if they apply it to starting a new business. And the government’s efforts to untangle the red tape of the past has rendered company creation formalities inexpensive and fast. As a matter of fact, just recently at Truffle we aided our partners in incorporating 7 brand new companies in the week between Christmas and New Year’s.

On the investment side, there’s definitely still a ways to go (mea culpa). But with the increasingly ubiquitous collection of professionally-run incubators (see How many startup accelerators is too many?), and seed funds like Isai and Kima, France is no longer totally devoid of U.S.-style early-stage investing.

Yet I submit that it is in the corporate sector where change is slowest. Whether it’s due to conservative values, complex decision-making processes, or insular networks, French enterprises do not have it in their DNA to do business with startups. There’s an old joke that a French software startup has better odds selling into American corporations than into its own backyard that still holds true. It’s no coincidence that the new generation of French startups gaining the most traction nowadays are by and large consumer internet plays.

To all you French entrepreneurial refugees in the States, I salute you for being adventuresome. I hold a (conveniently self-serving) respect for entrepreneurial immigrants in both countries. But also realize that it’s soon going to be safe to come home again.

The idea seemed attractive to the board at the time. With its pan-European footprint of titles like ITEspresso, Silicon, and The Inquirer, the company found itself exposed on multiple fronts: first, B2B technology ad budgets had been slashed by all large tech companies; but moreover, NME’s core markets of France, Germany, Spain, and Italy were all entering recession.

On digital content’s B2C side, things weren’t nearly as dire. Although CPMs were experiencing downward pressure, the diversity of audience and thus advertising base enabled quality consumer-facing websites like CommentCaMarche.com to remain sheltered from the downturn in corporate ad spending. The siren’s call of relative ad revenue stability on the consumer side was challenging to resist, especially when financial investors become alarmed at the impact on the bottom line short-term. Something had to be done !

But to the management team’s credit, they held their ground. Actually, they doubled-down. At the 2009 low point for B2B digital media, NME opened a UK presence. Even more crucially at the time, the company began brainstorming on how to diversify its revenue base while best leveraging its valuable audience of corporate IT decison-makers, such as expanding into lead generation. I won’t elaborate on the details because the story is still being written. But in hindsight it looks as though those difficult decisions at the nadir of the global financial crisis proved genius.

Charlie McCurdy, CEO of Apprise Media reinforced some of these choices in his excellent presentation at American Business Media’s Advanced Leadership Program on The Future of B2B Media. “Marketers are probably not buying banners or sponsorships for the media exposure, they want to drive leads to their websites. If white papers or Google AdSense deliver, they’ll do that instead.” In terms of b-to-b marketing share, ABM attendees forecast that live events would grow from 45.1% in 2011 to 48.4% in 2016; digital would grow from 12.8% in 2011 to 18.2% in 2016; and print would fall from 29.2% in 2011 to 11.7% in 2016.

In late 2010, NME witnessed a return of the banner ad budgets from corporates, but makes no secret of its appreciation of the importance of a diverse offer for this core client base, nor of the importance of scale. The company recently acquired the German subsidiary of CBS Interactive, and is on the hunt for additional acquisitions in Britain and France.

Nowadays it’s very fashionable in startup parlance to talk about strategic ‘pivots’. Indeed, the accelerating pace of innovation in technology often creates an environment where only those startups capable of redirecting their strategy on a dime can avoid obsolesence. But if there’s a moral to this story, it’s that there are no easy answers. Sometimes a ‘pivot’ is needed. Sometimes it’s better to scrap everything and restart with a blank sheet of paper. And yet sometimes, the old-fashioned wisdom of ‘sticking to your knitting’ prevails.

On January 17, only 31 members of the U.S. House of Representatives opposed the legislation, with 80 in support.  The day after the Jan.18 blackout, the 31-member opposition had surged to 122-strong (see ProPublica).  Even this microscopic blog’s activism elicited a surprising number of reactions here in France, including even from an assistant to a U.S. Congressman that happened to be on vacation in Paris.

But this is only round 1.  The $63m-funded army of lobbyists defending the well-financed old guard media are still in the ring.  David Binetti offers an insightful op-ed in TechCrunch explaining how the lobbyists will most likely take the fight to the most powerful influencers of the opposition directly, i.e. venture capitalists and thought leaders of digital media giants.  Round 2 will prove interesting.

My question is what should we do about this in Europe.  Europe was largely silent in round 1 (heaven knows we have other problems right now).  A typical government policy, like that of the UK, is to not intervene in the domestic legislative debates of another sovereign nation.  This is understandable.  But nefarious ill-conceived copyright legislation like SOPA would affect citizens of Europe as well.  What is the appropriate level of response?  I submit that it has to start with netizens of European digital media as well, a grass-roots effort just like in the U.S.

Hopefully, as Binetti suggests, this incident of SOPA opposition will come to represent an inflection point in the disruption of the entire political industry.  What if a successful political campaign relied not on how well-financed it is, but rather on mastery of social media to communicate a platform of integrity?  Now that would be something.

For more rationale, see: Why SOPA must be stopped

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The divestment allows CBSI to focus on its core markets of North America and Asia. For NME, it enables the company to shore up its previously modest presence in Germany with one of the top online IT media players. Now NME counts a truly pan-European footprint in France, Germany, the UK, Spain, and Italy. Notable online brands of CBSI Germany include ZDNet.de, CNET.de, and Silicon.de. NME combined will now attain close to 20 million monthly page impressions on its network of websites, all dedicated to B2B IT professionals, consistent with the company’s strategy to remain focused on high-value audiences. This acquisition also provides a significant bump in revenues to the profitable venture, which we carved out of the former VNU Group in 2007.

I commend the heroic efforts of Dominique Busso, Anilda Billon, Ruud Bakker, and the rest of NME’s leadership team in executing on this game-changing acquisition, and we welcome CBSI Germany into the NME family.

Here is a link to the announcement in TechWeekEurope.

Part of my mood stems from the thought of today’s hearing by the U.S. House Judiciary Committee on the Stop Online Piracy Act. The SOPA legislation currently winding its way through the U.S. congress would allow the U.S. Department of Justice, as well as copyright holders, to seek court orders against websites accused of enabling or facilitating copyright infringement. The bill would also make unauthorized streaming of copyrighted content a felony.

In a typical vast overreaction to a threat of a limited group (remember the Patriot Act?), the SOPA bill risks enshrining Internet censorship and crippling the Internet. I recommend Fred Destin’s post on Five reasons why SOPA is luddite legislation to understand how braindead Texas congressman Lamar Smith’s sponsored bill is.

The other item chapping my hide is the fact that I just submitted my U.S. tax return for last year. As an American working in France, I am required to file two tax returns: one with the France fiscal authority and a second with the U.S. IRS. The U.S. is one of only two countries in the world that taxes its citizens globally, no matter where they live, work, and pay taxes. So every year I have the luxury of paying taxes on my French income, and then an additional chunk to Uncle Sam on my same French income. Granted, there is a limited foreign tax credit, but all in, I’m contributing between 60% and 70% of my gross income to both governments.

I don’t mind paying French taxes and social charges, even their elevated amount. It’s the U.S. IRS’ demand of its pint of blood for income that I earn and am already taxed on in France that I find particularly egregious. This is double-taxation without representation. Adding insult to injury are the myriad penalties on many French investment products (like IRAs and mutual funds), rendering such vehicles so costly as to be unpalatable. No wonder that many Americans living overseas refuse to play by the rules. I’d like to see the “tea party” take on this cause with as much fervor as their other ideas.

Worse yet, the threat of new tax legislation called FATCA will increase the obligation of Americans worldwide on all of their financial assets. Foreign banks in particular will bear a significant reporting burden. An officer of a large French retail bank mentioned to me that if FATCA is implemented, his bank will likely no longer accept American customers due to the associated costs.

Americans living overseas are the foot soliders in the U.S. government’s battle to win hearts and minds. We could represent the States’ ambassadors writ large, but sometimes it feels like we’re being treated as traitors.

Among the takeaways of LeWeb’11, we are led to appreciate the inevitability of ‘social’ and ‘mobile’, as testified by the success of companies like AirBnB, or the famous “cross-over” of Google Maps into permanent predominance of mobile usage.

But the verdict on ‘local’ is mixed.

Gabe Rivera, CEO of Techmeme, suggests that ‘local’ is over-rated, and would not launch a local offer.  Why ?  Quality of local content is spurious.  More significantly, local content is not sufficiently abundant.

AOL’s Patch service boasts 10 million unique visitors across its network, built over the past 18 months.  Is this significant ?

Is local content sufficiently interesting to advertisers ?  If not, how will local be monetized ?  Just as we witnessed the small-town newspaper as the first casualty of the digital media age, does local offer enough scale to make business economics work in a global world ?

To be continued…

• A java back-end developer, to work closely with the Head of Technology and the Game Development team.
• A mobile games content manager, responsible for testing and selecting new mobile games that fit the audiences of the various gaming portals.

The above opportunities are based in the Netherlands.  Any interested candidates are welcome to contact me directly by email.

]]> http://markbivens.com/m/archives/portfolio-job-openings/feed 0 http://markbivens.com/m/archives/these-premises-are-utterly-confidential http://markbivens.com/m/archives/these-premises-are-utterly-confidential#comments Tue, 29 Nov 2011 21:41:04 +0000 mark http://markbivens.com/m/?p=666 Fred Wilson captured my feelings perfectly in his post today about Reception Desk NDAs.

Thankfully, this practice has not taken hold in Europe yet, European subsidiaries of US firms notwithstanding.

European startups, particularly their fundraising advisors, love asking VCs to sign an NDA.  As I’ve written before, I think NDAs waste precious time, bring little value, and backfire on most firms trying to raise capital.

Reception Desk NDAs represent one of the rare habits I sincerely hope Silicon Valley does not export.

So I’m looking for an ambitious intern with the following profile:

• a dynamic and entrepreneurial individual with aspirations to spend 6 months working in a VC fund
• authorized status in French university to qualify for a ‘stage’ (typically the French undergraduate business schools are the primary source of interns, but this is not a requirement.  any French university could work.)
• a self-starting individual able to work in an unstructured environment (read: fun but chaotic)
• a comfort level with the digital media, mobile, and software domains
• a willingness to perform a variety of professional tasks, some highly intellectually stimulation, others less so
• proficiency in 2 of the following languages: French, English, Japanese, Portuguese

Any interested candidates are welcome to contact me directly by email.

• Scan & Target
• Utel
• CrowdyNews

All three were investments in conjunction with 3 of the 16 independent holding incubatrices vehicles we advise.

As readers of my blog know (yes, I’m talking to both of you), I’m not a big fan of vc blogs that merely regurgutate news bits, but rather prefer those that actually provide at minimum some interesting opinion and better yet some insight into the rationale for doing something.

In this spirit, here’s an excerpt of why we decided to make these investments. Our seemingly valid rationale today will most likely be proven inaccurate tomorrow, but that’s what makes this exercise fun.

Scan & Target

We suspect that Scan & Target’s tremendously powerful technology of contextual intelligence, battle-tested in military applications, could be perhaps even more relevant in the social media space. One of our investment beliefs at Truffle is the disruptive nature of social media on the enterprise, and this fits well within this theme. We co-invested in this transaction alongside the “Internet Holding Incubatrice.”

Utel

Utel, and their flagship service Fotochat, offers casual dating over mobile. It’s a sector with a broad array of high-potential niches. We believe that Utel positions itself smartly on a select few of the most promising ones. Our main rationale for investing was two-fold: i) a highly opportunistic secondary transaction, and ii) a crazily positive (and positively crazy) entrepreneur brilliant at monetization. We co-invested in this deal alongside another holding vehicle “Holding Incubatrice Mobile”, aka Solomoco.

CrowdyNews

Rounding out the trifecta, CrowdyNews has a clever algorithm based on Twitter that places relevant Tweets alongside online news articles. It’s no secret that newspapers are struggling to find ways to replace their declining classified ad revenue. CrowdyNews helps them do this, while also adding a real-time UGC opinion component to their websites. We think we can complement Crowdy’s U.S. penetration with an entrée into Brazil. Yet another of our 16 holding vehicles, the Holding Incubatrice Internet & Mobile, led this investment.

I’ve long argued that the VC model in Europe is plagued by the tendency to keep Zombie startups alive, to the detriment of plowing more time, resources, and capital in the real disruptors.

Johnson cites recent research from the UK’s National Endowment for Science, Technology and the Arts indicating that when it comes to job creation, the new companies that really make the difference are not the mass of start-ups – which will never grow much or employ many staff – but the gazelles.  These ambitious, bold ventures that innovate and build something significant are transformational in terms of jobs, technology and wealth creation.

Johnson prescribes the same model to politicians eager to spur innovation and stimulate job creation:

It is partly about targeting money and assistance towards opportunities that offer enormous upside. Funds and government support should be directed at situations that address large markets, not tiny niches. And these markets should be growing: mature sectors rarely see hyper-growth entrants. Deregulation, tax breaks, credit – all these initiatives should be channelled towards the most dynamic and professional start-ups, which are typically raising venture finance. They are the projects most likely to make it big.

 

Politicians should forget about being fair. Resources must be focused on real talent where there is a better chance of a breakthrough. If anything, they must increase inequality to ensure help reaches the right places.

Uncertainty causes unease. Unease causes indecision.

Startups: if you sell products or services to enterprises in Europe, prepare for longer sales lead times, deferred purchasing decisions, and extended payment terms. And if you’re in the process of raising VC money, close your round lickety-split, because I can assure you that every VC in Europe right now is entering wait-and-see mode.

I’m asking my portfolio companies to prepare a crash case scenario, not necessarily to act on any drastic measures, but at least to begin the mentally draining process of thinking about it. To be continued…

The only reaction this three-letter acronym would elicit in France, however, would be ‘Tony Parker’. And even that is limited to a select sub-segment of the general public.

Now, I have a feeling that all this is about to change. Within the span of a week, I’ve heard two separate entrepreneurs boast about their Minimum Viable Product.

The concept of Minimum Viable Product is anathema in France, running counter to almost everything product development here stands for… and I think it’s brillant.

Minimum Viable Product is not merely a beta version or a stripped-down service, it is a methodology and a mantra for product development (I defer to Eric Ries’ comprehensive explanation). And I think that as a guiding principle it has the power to transform tech entrepreneurship in France.

An MVP mindset will give entrepreneurs no choice but to throw out the part of their engineering training that encourages the pursuit of technology sophistication and perfection, forcing them instead to start with their hypothesis of the market need, and ask what is the bare minimum necessary to validate their hypothesis in order to develop a v2.

I’ll be looking forward to hearing more entrepreneurs pitch me their minimum viable products. Perhaps even one day Ecole Polytechnique will institute a course on the methodology like Harvard has done.

I think we’re on the verge of something monumental.

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Here in France, unemployment improved slightly in Q2 but still hovers between 9.5 and 10%.  Relatively speaking, the figure is not quite as shocking as in the States.

But I think this will rise further for one simple explanation that highlights the contrast between France and U.S. labor markets.  In France, most unemployed persons receive 23 months of unemployment benefits equivalent to approximately 70% of their previous salary.  This is a very comfortable remuneration for 100% free time.  Talk about a paid, extended sabbatical that most working Americans could only dream of.

One modest proposal that re-surfaces every few years yet falls on deaf ears involves forcing the unemployed to work.  The idea of forced labor triggers unpleasant reactions.  But the latest incarnation of the concept actually strikes me as not unreasonable: the unemployed would only be forced to work in order to maintain their unemployment payments above a certain minimum threshhold; they could choose the company in which they work; and the work commitment could be structured as a part-time gig to allow the individual the critical time for activities like a proper job search, continuing education, or trade re-training.

The details would necessarily require substantial and legitimate debate, but it seems that the idea merits discussion.  What I like about it is what this could mean for France’s startup environment.  One of brakes on entrepreneurship in France is the challenge startups face in assuming the financial risk of hiring.  Reforming France’s restrictive labor laws is the systemic solution, but enabling startups to benefit from supplementary personnel without any financial risk would be more politically-palatable to implement and interesting to test in practice.

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The swim featured a three-loop lake circuit with a “double-australian” exit and a tight transition area. Not ideal, but ample width in the lake made for a pleasant swim with minimal combat swimming.

The 44km bike course proved to be my downfall. A particularly steep and gravel-filled descent took out a handful of cyclists, including me. I left the race in an ambulance with a fractured clavicle. Season over. Major fail.

To look on Monty Python’s proverbial bright side, there are a handful of ways to spin a positive light on this:

1. I found an excuse to escape the grueling 12km run course which I was dreading.
2. I can claim to have lost out on the bike split to Laurent Jalabert, former Tour de France cyclist who was also competing in this race.
3. Most importantly, I witnessed the best in human nature: A fireman triathlete who happened to be behind me stopped his race in order to resuscitate me and call the paramedics. I figure I cost him at least 8 minutes off his finishing time. This man is a saint and reinforces what triathlon is truly about.

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The initial calamity of not being able to play Flash on the iPad (and not being able to do this even faster on the iPad2) has subsided. This is probably due to a number of factors, such as the rising legitimacy of Html5, tools like Google’s Swiffy that enable Flash to Html5 conversion, the increasing willingness of content owners to offer iPad friendly sites, and in my opinion the fact that the iPad is so cool that consumers were willing to overlook this defect pending the rollout of Html5 versions of major sites.

Still, Peter Judge provides some interesting testimony in eWeekEurope about why Flash still has legs, notably for reasons of lack of seasoning when it comes to security.

At our portfolio company BoosterMedia, we’re fairly agnostic in the debate. The company’s primary thrust in social mobile games centers on the Html5 standard, but currently the bulk of its portfolio of mobile social games are developed in Flash. Html5 has come a long way in the past year, and it is only recently that the technology is sufficiently sophisticated to enable a social game. In fact, to my knowledge, BoosterMedia is the first company to offer a browser-based social game on mobile based on Html5 (see http://jewelclubgame.com).

So, Five alive, but Adobe’s no flash in the pan.

France undoubtedly boasts some outstanding engineering talent.  Even better, the entrepreneurial spirit, especially among the new generation of developers, has progressed exponentially over the past ten years.

However, the French VC market has become the epitome of the cliché of “too much money chasing too few deals”.

The French state plays both an indirect and a direct role in all this.  Indirectly, the government encourages capital flows into venture funds via its extremely generous tax incentives, both on income and on wealth taxes.  The proliferation of “Loi-Tepa”-inspired funds is one of the main reasons that we curtail our investing during the “Easy-Money Period” each spring.

Now the French state will double-down on its direct impact in VC.  Building on its flush Fonds Stratégique d’Investissement, the state-sponsored investment vehicle CDC Entreprises has announced a €400 million digital ventures fund (as part of the government’s €1.4b National Endowment for the Digital Society, “FSN”).  Known as FSN PME, the fund will invest up to €10m in early-stage companies, with the aim to make 30 investments by the end of 2011.

30 investments within the next 6 months.  Wow !

To its credit, the government seems to be fulfilling its primary objective, which is job creation.  While job creation is certainly a welcome by-product of VC investing, an independent venture fund’s true north is capital gains generation.  Both are noteworthy aims, but giving priority to one can hamper the other.

According to a recent mailer, starting November 18 this year, my Air France Amex card will offer 15 Flying Blue miles for every 10€ spent with Air France, KLM, and Hertz. This most grandiose gesture represents a negligible improvement over the current 14 miles / 10€ expense now. Accompanying this change, however, is that all future spend on this card will no longer earn Air France qualifying status miles as it has in the past. This draconian move eliminates in my opinion the only worthwhile benefit of the French American Express card.

Moreover, the smelliest part of all this is AMEX France’s presentation of this modification as an “advantageous improvement.” Hogwash.

I feel betrayed, AMEX. French merchants are notorious for refusing to accept the Amex card because of your above-market transaction fees. I would regularly defend your side, AMEX, vigorously protesting against those merchants who try to talk me out of paying with my Amex card. I would even favor Amex-friendly merchants whenever possible with my patronage (for example, I always chose Go Sport over Decathlon).

That you have the audacity to mock clients like me by presenting this program change as a benefit turns me against you, AMEX France. I will express my displeasure with my pocketbook and discourage your other clients as well.

One of the beauties of Europe is the accessibility of my habitual destinations via high-speed rail from Paris.  Paradoxically, an inexpensive and brief 2-hour train ride can lay the groundwork for an unwieldy mobile phone bill the minute I cross a national border.

Roaming fees, especially data roaming, contribute substantially to the net margins of European telco’s.  Although they are under regulatory attack from the EU, including some frighteningly audacious propositions which I’ll write about later, roaming fees remain exorbitant.

I’ve experimented with a handful of solutions to circumvent these fees.  Here’s what works best for me:

1. I purchased local prepaid sim cards in certain countries, notably the UK and the Netherlands where I spend the most time.
2. At my office we use an excellent VOIP provider called Keyyo, which also happens to be one of our legacy portfolio companies (now publicly-traded Euronext ticker: ALKEY).  In addition to my mobile number, I’ve also systematically distributed my Keyyo land line number to my contacts.
3. Keyyo provides me with economical calling rates from my Keyyo line to mobile phones, even international mobile numbers.
4. Before my trip, using Keyyo’s web interface I program my Keyyo line to transfer all calls to my local sim card at my destination.
5. Anybody that calls me on my Keyyo line is automatically transferred to my local mobile phone in the country I’m in.
6. Although I pay Keyyo a fee for these international calls, I save a bundle on expenses relative to the data roaming fees I would pay on incoming calls to my French mobile phones while abroad.

Moreover, with relatively inexpensive prepaid data plans, like those offered by T-Mobile in the Netherlands, I can use a second Android phone while abroad that remains fully in sync with my Gmail account and eliminates the hassle of physically swapping sim cards.

My objective of this scheme is to circumvent roaming fees all while not incurring any substantial inconvenience.  There is undoubtedly room for improvement, and I welcome any inspiration others may have.

And I thought last year we had seen it all.  I’m dumbfounded in awe and admiration.

LeadMedia develops performance-based marketing solutions that enhance online lead generation and customer retention.  A company we had first financed in a contrarian move during the dark days of December 2008, LMG has made on a long journey in a short time.

Accolades are due to the advisors: Genesta Corporate Finance, Bryan Garnier, Lerins Avocats, and NewCap for their tireless efforts in bringing this audacious public offering across the line.

And most importantly, I commend the tremendous efforts of Stéphane Darracq and his entire team for building a successful transatlantic leader in online performance marketing.

This adventure is only beginning…

I discovered that starting a keynote with a Dilbert cartoon is an effective ice-breaker for a one-hour slog.  Here is the slideware of the keynote discussion which I cobbled together in the hotel room the night before.  For those seeking a good cure for insomnia or stuck in an airport with unlimited wifi, any suggestions for improvement would be most welcome…

On a more serious note, I applaud Inge and Björn for their impeccable organization of a valuable conference.  Thank you !

I enviably don’t think I’ll ever be able to boast about missing opportunities like Paypal and Google.  But I do sincerely hope to build enough of an investment track record over the years to accompany the winners with a noteworthy anti-portfolio of my own.

In addition to Nedstat, which I added to my anti-portfolio last year (I had an opportunity to invest in Nedstat in January 2009; they were acquired by comScore in Sept-2010 for $37 million), I place another heartbreaker on the list: ConcoursMania.

ConcoursMania is a beautiful company in which we passed up an opportunity to invest in February 2008.  The Founder and CEO, Julien Parrou, is one of the best entrepreneurs I’ve ever met in France: passionate and resourceful, having bootstrapped his original company based on his astute recognition of an under-served market.

ConcoursMania just successfully completed an oversubscribed IPO on the Paris Alternext with a market cap now exceeding 30M€.  I salute Julien and his team.

I remember back in 1996 when my grandmother (since passed, bless her soul) caught me off guard, as she had a knack for doing, with a highly-esoteric tech question. She had invited me for lunch, an annual ritual in which we caught up on each others’ lives, and toward the end of the meal, turned academic: “Now, there’s something I’ve been meaning to ask you: what is a dot-com?”

It’s hard to imagine today how unusual such a question would have sounded, but this was back in 1996, and coming from my grandma, who had never even touched a pc. I scrambled to piece together a professorial explanation on a topic which was still relatively new even to me.

But this was Silicon Valley, and my grandma was a voracious reader of the news, so she quickly picked up on this emerging new jargon.

An asset whose value even my grandmother could perceive fifteen years ago has now become an indisputable requirement for any business. Yet, amazingly, even today some web businesses fail to grasp this detail.

I was reminded of this during recent conversations with two different digital media startups. One is launching a new product; another is a startup in stealth mode that is now in the process of choosing its trade name prior to launch.

Even for European ventures, the dot-com is the neighborhood to inhabit. Sure, feel free to register your local country extensions and other name variants, but if your digital media venture does not possess the dot-com for your core name, I submit that your company’s value will be inescapably diminished.

Fred Wilson of Union Square Ventures advises his portfolio companies to spend up to $50,000 to acquire their dot-com if they don’t own it already. He also offers some excellent suggestions for procuring this asset, such as rent-to-own or purchase-for-equity schemes.

Perhaps even better yet, consult the available dot-com’s — or probe the secondary domain market for those on reasonable offer — before finalizing your product name. Failing to secure your dot-com early will make you rue the day you’ve built a successful business only to witness an unrelenting drag on your marketing efforts.

The weather conditions proved ideal.  Far cooler than the heatwave in Paris, Montpellier offered a morning temperature of 15 degrees, perfect for biking and running.  At 14 degrees, the swim split was outright freezing, and the dammed-off river basin collected a ton of debris and rubbish (I was even knocked in the head by a floating coke bottle at one point).  Why they don’t hold the swim in the sea or in one of the lovely nearby étangs escapes me.

I found the bike course to be scenic and well-marked.

The run course, on the other hand, proved disastrous.  It was so poorly marked that I and the poor souls following me took a wrong turn resulting in a 3km extra detour.  My fault for not studying the map in advance.

All in all, this represented a perfectly refreshing event to return to the sport following my accident recovery.  The Hérault region surrounding Montpellier is so gorgeous that I’m considering making this my focal point for the 2011 triathlon season.

To be fair, fundraising in a startup is never easy. The fundraising process represents a substantial effort in time and distraction for the entrepreneur, even during the frothiest of times.

But stimulated by recent fiscal measures in France, the 2-month stretch between April 15 and June 15 has become a period in which a wave of investment vehicles come out of the woodwork in a rush to invest in French startups.

The genesis of this wave began in August 2007 in the form of a French law enacted to stimulate work (travail), employment (emploi), and purchasing power (pouvoir d’achat), abbreviated as the “Loi TEPA”. While this law encompasses a basket of tax incentives, the most impactful for the venture capital industry has in my opinion been the component that treats the French wealth tax.

The French wealth tax (ISF) represents a progressive tax on households possessing net assets exceeding a certain threshhold, currently 800k€. The annual filing deadline for the ISF tax return is June 15.

Specifically, under the Loi TEPA, French taxpayers liable to the ISF can receive an immediate tax deduction on investments they make in French SME’s that are not publicly-quoted. This tax deduction reached as high as 75% last year, though now has been trimmed back to 50% in 2011. In other words, a taxpayer that invests 90k€ in a French startup before June 15 will receive an immediate deduction of 45k€ on his ISF tax. Of course, certain boundaries apply, for example, the total deductible amount is capped at 45k€, and the SME must meet certain criteria, notably a number of employees below 2,000 and a business activity that is considered “innovative.” While SMEs in other EU countries and even non-tech industries may qualify in theory, the upshot is that this ISF tax deduction is easiest to justify for investments in French high-tech startups.

The French seem to be even more passionate about tax deductions than about foie gras or fine wine. And the amount of ISF tax receipts in France is significant (3.8m€ in 2008). So, investment vehicles which offer ISF tax deductions are popular among the French upper middle-class. Moreover, private bankers love these ISF Funds; they represent another investment product they can push out to their wealthy clients which is an easy sell and hence fast fee generator.

As a result, ISF Funds are numerous. And they target investments in the very same companies that traditional VC funds would target.

However, the nature of these ISF Funds leads to one key distinction: since the investors in these vehicles have already received a significant tax deduction, their ROI requirements on the performance of the funds’ underlying investments is less important. In fact, a general perception among ISF Fund investors, rightly or wrongly, is to be satisfied with a money-back situation. If the ISF Fund returns exactly the original investment, say 5 years later, one could argue that the performance of the Fund is unacceptable. Yet the individual investor will be delighted with his blended return, thanks to the significant tax deduction at entry.

This key distinction creates a mismatch in the market relative to a traditional VC fund. On the one hand, an ISF Fund does not require the same rigor and high-calibre team necessary in a traditional VC fund. Traditional VC’s must keep their institutional investors happy; and it is largely on the basis of their track record that they succeed or fail in raising future funds. Raising an ISF Fund does not require a road show, merely the right distribution network to reach the individual taxpayers with a no-brainer product.

Additionally, thanks to the existence of the “tax shield,” the ISF Fund can thus afford to invest at higher valuations than a traditional VC whose investors’ IRR will be based solely on the capital gains.

So the existence of these vehicles is a double-edged sword. For entrepreneurs seeking to raise money at higher-than-market valuations, the ISF Funds can be a relative easier source of funding. Decision cycles with these vehicles tend to be fast too, as they must invest before June 15 to qualify for the tax deduction.

On the flip side, the entrepreneur may in return forfeit the longer-term benefits of partnering with a VC firm who will be laser-focused in adding value in whatever way they can (network, recruiting, m&a, international expansion, etc.) with the sole objective of maximizing capital appreciation of the company.

Accordingly, at Truffle we tend to not make many investments during this easy money period (with, for full disclosure, the sole exception being via our holdings incubatrices, which are indeed ISF vehicles).

Judging from her performance in yesterday’s Ironman South Africa, Wellington’s “platform” is like a stainless steel structure built on bedrock and surrounded by a moat. Wellington’s race yesterday was not merely record-setting, it was record-crashing.

She hammered the field within minutes of exploding out of her swim-to-bike transition. Her 2h52 run split — yes, that’s a 2-hour 52-minute marathon after swimming almost 4km and cycling 180km — proved faster than every other man, woman, and dog.

Not only did Wellington’s 8h33 overall time become the new course record, it represented the fastest woman’s Ironman time ever.