I'm back in London for a few weeks, trying to determine, among other things, whether Europe still has a technology industry. The reassuring official line of the venture capitalists and entrepreneurs, at least those who have seen cycles before, is that the clock has been set back to 1996, or maybe 1998, or maybe 1994 - at any rate, before all the craziness started.
And that is a good thing, apparently. The venture capitalists are seeing real companies now, with solid technology, at reasonable valuations. Entrepreneurs know they have time to build before being forced into the glare of the public markets. Technology marches on, relentlessly. And it is not as though 1996 was all that bad.
Well, actually, in Europe it was. US technology veterans may comfort themselves with rhythm of the cycles. But, for Europe, 1996 was bad. There was nothing beyond a few embryonic start-ups and the branch offices of US technology companies. And I simply do not believe, or do not want to believe, that the past five years have been for nothing.
For a perspective, I turned to Christopher Spray, senior principal at Atlas Venture, the largest technology VC partnership. (I must declare an interest: Atlas is an investor in Moreover Technologies. He is one of the few European venture capital veterans. This column draws on his thoughts, but by no means slavishly reflects them.) The technology investment tide came and went, but, I asked, did it leave anything on the beach?
First, the relapse. Venture-backed companies, which had briefly gone public on multiples of revenues or eyeballs, are now again subject to the old rules: businesses should demonstrate at least 20% operating margins, funding only as market-proven, and as much as two quarters of profitability before a stock market flotation.
And it appears little easier now to find and attract talented managers to start-up companies. During the boom, VCs could lure executives away from blue-chip European companies such as Ericsson. Now they and others complain again about 'the missing piece' in the European technology sector - effective and entrepreneurial managers.
The enduring problem was that they have so few local role models. Most of the dot.com entrepreneurs who grabbed the limelight in 1999 were too green to win the respect of the executive cadre. And Europe's more established entrepreneurial heroes, such as Richard Branson, tend to be more haphazard managers than their US counterparts.
Of course, there are some templates. Spray mentions Stan Boland and Bernard Liautaud, CEO of Element 14 and Business Objects, respectively; but when the European press is busy building up and tearing down internet icons such as Ernst Malmstem and Julie Meyer, how many people have heard of them?
So what are the lasting changes, if any? The short answer: less than we judged at the height of the internet boom, when the whole economy seemed new; but more than we think now, in the economic and psychological depression.
Although the managerial class may not be hooked on entrepreneurship, there has been a substantial change in academia. Most technology-focused venture capital firms such as Atlas hang around universities the way molesters hang around schools. And, whether because of low academic salaries or the power of successful example, a 'staggering' number of academics have turned their research into a venture, according to Spray.
Another pool of talent is the US. Job opportunities are less attractive there, and residency more problematic since the 11 September attack. There are more than 100,000 Europeans in Silicon Valley alone. Already, many are returning. And it is also on these re-pats that VC firms such as Atlas and Benchmark Capital are relying to staff their European ventures.
Apart from technology and talent, the other key ingredient in a new start-up is capital. Although the VC industry raised more than dollars 50 billion for European investments, that money is being disbursed only gradually, and some is being returned to investors.
Here, Spray's perspective is most useful. In the late 1980s, venture capital was still relatively new to institutional investors. Many of them, disappointed by the returns after the initial public offering market closed up, withdrew from new investment in venture funds. Spray would tell his wife: 'I don't know whether we're going to get through this.'
Institutional investors have gone into this downturn, however, with a much longer track record. Over the past 20 years, the average rate of return from venture capital investments has been 23%. Top-tier firms such as Atlas have generally beaten that number. Investors are not going away.
So, please, please everyone in Europe, stop saying that the clock has been turned back. It is not reassuring, and it is not true.