Julie Meyer: 'Entrepreneurs backing entrepreneurs: it's the future!'

Julie Meyer, online Dragon and founder of Ariadne Capital, reckons there's a new kind of capital in town. Here's why successful entrepreneurs are rolling up their sleeves to help the next generation of start-ups.

by Julie Meyer
Last Updated: 21 Nov 2012
When Mike Lynch sold his software firm Autonomy to HP for £7.1bn in August last year, there were 30 more millionaires walking around Cambridge.

Entrepreneurship has a ripple effect. It spreads a pool of talent; it produces a subset of high-performing companies, creating taxable revenue for the nation's coffers. It also transforms people into focused, some would say obsessed, individuals who want to change the world. Importantly, it also spawns a pool of high net-worth individuals who use their cash to seed the next batch.

Business owners are naturally inclined to help other entrepreneurs. They’ve experienced the super-charged growth, the near-death experiences, the breakthrough moments and the triumphs. They know that the line between success and failure is very thin indeed. They understand the courage (and personal sacrifice) it takes to build a business and, if they’ve made money, they have the boldness to do it again.

Of course, not everyone wants to put in the hard graft of 100-hour weeks, with no guarantee that the universe will be fair to you. Smart people lose, and dumb ones win. If you're a gambling man, don't go into entrepreneurship: there are more sure-fire ways of making money – and staying sane.

But start-up success is like a drug. In fact, it’s a downright addiction – the high you get when you see your company take off like a rocket and finally settle into a stable, profitable orbit. Entrepreneurs become hooked on the journey and, once they’ve made their fortunes, they tend to be inspired to help others. They just can’t help themselves.

As an American who grew up in Silicon Valley, I was familiar with this model of entrepreneurs backing entrepreneurs.  Vinod Khosla, who co-founded Daisy Systems, the first significant computer-aided design system for electrical engineers, and then Sun Microsystems, became a partner at Kleiner Perkins investing in the Valley’s technology start-ups. Peter Thiel and Reid Hoffman, founders of PayPal and LinkedIn respectively, hit the jackpot when they backed a cash-strapped Mark Zuckerberg.

There was no equivalent of that model in Europe. I was convinced that the future of entrepreneurship should lie in the hands of entrepreneurs themselves so, the day after selling my business First Tuesday to Yazam for $50m, I started working on the blueprint for my next company, Ariadne Capital. We launched in December 2000 with one aim: aggregating entrepreneurs’ capital for the next generation of start-ups. We started with the backing of 57 founding investors, including the entrepreneurs behind WorldPay, Hotmail, Betfair, and SES Astra.

The model has caught on. There are now a number of funds that do what we've been doing for nearly 12 years. As I argue in my new book, Welcome to Entrepreneur Country, this is the best model for funding start-ups. Only someone who has been in the burning building and lived to tell the tale can really understand the pressure of being a founder. If you've been there, you can assess whether the young pup in front of you has the steel required to build a business. They'll need a confidant. They’ll need a network. They’ll need empathy. They’ll need an investor who doesn't desert them when the going gets tough.

An entrepreneur never really stops being an entrepreneur. That’s why Paul Barry Walsh, who made around £70m selling his computer security business Safetynet to Guardian IT in 2000, now runs micro-finance organisation Fredericks Foundation, helping disadvantaged people to set up or expand their own business. Nothing beats the taste of success – and then sending the lift back down to help others. Nothing.

Julie Meyer is the CEO of Ariadne Capital and author of Welcome to Entrepreneur Country

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