24 May 2013

URGE IO receives funding to finance ambitious web plans

Business angel deals have showed plenty of promise so far in 2013, with each month of the year to date producing good results, but how sustainable this growth is remains an ever-present question. The first quarter of the year saw the best showing since Q2 2012, with deal-making of EUR 824 million spread across 319 deals, according to Zephyr, the M&A database published by Bureau van Dijk. By value, this represents a 17 per cent increase on the previous quarter. At the time of writing we are now just over half way through Q2 2013, and although it would not be unheard of if things were to go very quiet in the next few weeks, so far the industry looks to be keeping up with its own high standards. To date, 173 business angel transactions worth EUR 544 million have been notched up on a global basis. Of these deals, 37 valued at EUR 38 million involve targets based in Western Europe.

In May alone there have been six European business angel transactions valued at between EUR 150,000 and EUR 15 million. The highest of these involved German air conditioning and refrigeration systems manufacturer Efficient Energy, which received EUR 15 million in a round  led by Santo VC, which invested almost EUR 12 million alone, while the remaining EUR 3.20 million came from MIG Verwaltungs and Mr Cornel Lindemann-Berk.

Indeed, the top two European business angel deals in May featured German targets. More interesting was second-placed URGE IO, which closed a first round worth EUR 2 million on the 15th. The Berlin-based company operates an online comparison platform for electronic and telecommunications equipment known as Versus IO. The site has been described as the most sophisticated of its kind, and eventually hopes to develop beyond simply comparing objects, with plans to stack sports stars, actors and entrepreneurs up against one another, ranking them based on goals scored, awards won and so on. This is certainly an ambitious plan and only time will tell if it is achievable. Lars Dittrich, Dario Suter and Dave McClure, via 500 Startups, took part in this round, accompanied by venture capital firms High-Tech Gründerfonds Management and Earlybird VC Management. The latter’s chief executive, Dr Christian Nagel, said he believes the platform has the potential to disrupt the product comparison market.

However, this is not the first time URGE IO has benefitted from the generosity of an angel investor. In December 2012 McClure injected USD 100,000, which the firm said would be used to develop the platform and add new verticals. Prior to that it had already been on the receiving end of an investment from venture capital firms; JMES Vermögensverwaltung partnered with High-Tech Gründerfonds Management in August 2012 to invest EUR 700,000.

Although there will not be many companies with the same specific lofty ambitions as URGE IO, there is scope for comparison within the web portals market. Generally, this sector has generated little in the way of business angel funding in Europe, particularly in the last few quarters. Q4 2012 saw two deals recorded in the region with unknown considerations, while Q1 2013 had just one transaction which also did not have its value disclosed. So far in Q2 the URGE IO deal is the only European web portal business to have been on the receiving end of angel investment, but there is still time in which the industry could reach the heights of Q2 2011, when eight deals worth EUR 22 million were posted, and Q1 2010 (six deals valued at EUR 11 million). The picture improves slightly on a global basis; this quarter has seen two web portal deals worth EUR 3 million worldwide, compared with three worth EUR 1 million in Q1 and five valued at EUR 18 million in Q4. If these results are anything to go by, there is global interest in the online industry.

Others to have brought in angel funding in the web portals market in 2013 include German cloud-based academic and education platform operator iversity, which received an undisclosed injection in January from T-Venture Holding and Marcus Riecke, who subsequently took over as the company’s chief executive. Proceeds were to be used to develop services in Europe similar to what are known as massive open online courses (MOOCs) in North America. In addition, the firm hoped to strengthen its workforce, implement pilot projects and further develop its product.

According to Zephyr, the industry’s largest European angel investment deal by value since the beginning of 2006 was a third round of funding for Spanish online discount advertising player Groupalia Compra Colectiva. That deal completed in April 2011 and saw the business bring in EUR 11 million from Lucas Carné and José Manuel Villanueva, as well as venture capital investors including Nauta Capital, Caixa Capital Risc SGECR, Index Venture Management, Insight Venture Partners and General Atlantic.

In general, European business angel activity looks steady. May 2013 to date has already recorded EUR 19 million of deal-making, which makes it level with April’s total, although that was spread across a larger number of deals (31 transactions, compared with six in May to date), suggesting that deal values could be on the rise. Should this pattern continue, this month will have surpassed April by value by its conclusion, and may even push its way towards March’s total of EUR 42 million.

© Zephyr