As a young man, George Coelho wanted to be a rock star. He learned to play bass, wrote articles for music magazines and dreamt of a life on the road.
One of these articles put him in touch with the bassist for Mod legends The Who, the late John Entwistle. They became friends and Coelho would go to Entwistle’s house and learn from his idol.
‘I’m a failed rock star,’ confesses Coelho, sipping tea, an American twang to his voice. The wanderlust that mixed with those early musical yearnings didn’t subside and this Hampstead-born son of a psychologist and businesswoman continues to travel far and wide.
If the door closed on music, then blazing a trail as a venture capitalist in technology companies had to be the next best alternative. Besides, VCs are, in their own inimitable fashion, quite rock ‘n’ roll. For one, they never wear ties.
Coelho sits on nine boards in his role as general partner of Balderton Capital, which has £750 million under management, working with the likes of London-based online movie provider Lovefilm International, Swiss software outfit BridgeCo and MBA Polymer, a plastics recycling company headquartered in California with a main production plant in Austria.
He’s no stranger to racking up the air miles. ‘It’s in the blood,’ he says, noting that he grew up in the UK, France and the west and east coast of America. ‘My parents left India in the late 40s and were some of the first professional Indians to come to Britain. They did another degree here and then went to Harvard. It’s part of my DNA to uproot and be nomadic.’
After leaving George Washington University in 1977, Coelho had a spell in banking as a financier for airlines and aerospace companies before moving to technology giant Intel. It was here that Coelho struck the right chords in the world of private investment.
He spent just under a decade there, where he founded a venture capital arm and invested in over 100 companies around the world. He hit it big on a number of deals, such as Pacific Century Cyberworks, World Online and Broadcom.
The latter makes semi-conductors for wireless applications. ‘I think we only put £1 million in and got out for around £3 billion. It’s one of the great chip companies,’ he says.
Typical of Coelho’s self-effacing manner, he says that ‘a lot of luck’ was involved in the deal. Providence has shined on a number of occasions, in particular during his nurturing of online betting sensation Betfair from its unpromising beginnings as Flutter into a £130 million operation. Coelho notes that he did a lot of things wrong with the company in the early days: ‘I overpaid and had very little demand from customers. Now it’s going like a train and is a wonderful, award-winning business.’
The common theme among all these companies is technology. Already a face among the movers and shakers of Silicon Valley, Coelho joined Bruce Dunlevie and his elite venture capital cadre at Benchmark in 2000. Dunlevie and his team had backed a number of winners in the US, but the aim of bringing Coelho on board was for him to drive investment in Europe.
Coelho comments that he couldn’t have asked for more. ‘We were able to raise a fund quickly. They backed us and supplied the infrastructure and a great brand,’ he says, noting that the thinking behind the arrangement was straightforward. ‘There’s no way a European could go to the US and know exactly what they were looking at when reviewing a prospect, and vice versa.’
Given Coelho’s years at the not-insignificant Intel, the fact that he was impressed by the calibre of the individuals passing through Benchmark’s offices says something. With its democratic, non-hierarchical structure, the organisation sounds like a supergroup; the VC equivalent of The Traveling Wilburys.
‘During my first day there, I thought it was a stitch up. Magic Johnson came in with Howard Schultz of Starbucks to pitch an idea, and later, Eric Schmidt came in, pre-Google, when he was still at Novell. I thought: is every Monday like this?’
The US and European partnership has led to some major deals, such as eBay, Bebo and MySQL, but in June this year it was announced that the original Benchmark team were going to concentrate on the US. Balderton Capital, which has its headquarters in London, was subsequently created. Says Coelho: ‘The connection between Silicon Valley and us was less important in the end. I think Benchmark wanted to be less international, whereas for Balderton it’s very important. I’ve been investing globally for 17 years.’
According to Coelho, the US and European arms of Benchmark were always separate entities, but they shared a common brand. Going forward, he says, Benchmark will remain a significant private backer and benefactor of Balderton. Coelho notes, however, that there were times when interests overlapped.
‘In a few instances, we did start to step on each other’s toes, doing the same deal twice,’ Coelho observes, citing online moneylender Prosper as an example. ‘[Occasionally] it was difficult to stay out of each other’s hair.’
Coelho certainly thinks the UK and Europe have a lot to learn from the golden state, which he describes as a venture capital utopia: ‘Silicon Valley has the best kind of immigration in the world, with people coming from India, China, Britain, France and Israel. It has sunshine, great universities, a culture of making money, plus many companies that have been there and done it before.
‘There’s freedom to raise cash to start a business. I had a person who worked for me at Intel and came to me and said: “George, I’m leaving and I need to raise money to start my own business. Could you give me some money?” I said “yes” and wrote him a cheque. Not a huge amount, but it was a start. That night he raised £1 million just by ringing people.’
As an entrepreneur, you couldn’t ask for more. ‘They have the right bankers and investors who take a chance, mentors who’ve made money before and help bring younger people through. The whole network is right for risk taking, for changing jobs and reinventing yourself. It’s a large, English-speaking, $14 trillion (£6.87 trillion) economy. The VC system is almost overdeveloped as there’s so much cash for every stage of investment.’
This US mentality has armed Coelho with an optimistic and can-do attitude, which has served him well in Europe and the UK, markets in which he discerned a ‘jaundiced’ approach to entrepreneurship.
‘In the UK we tend to think we’re not good enough, which is totally false. There’s also the view that we don’t sell enough, which is probably true but that can be learnt. The culture over here is changing. As for me and what I do, I like to impose my world-view, my culture of winning.’
As for the types of companies he and his fellow partners at Balderton look for, Coelho says they tend not to be capital-intensive projects for which infrastructure needs to be built, such as a telecommunications venture. ‘Our average investment over a period is $15 million to $20 million. We want capital-efficient businesses. At the moment, social networks are popular because they are, of course, very capital efficient. They either work or not in a pretty short space of time.’
When putting a stake in a company, Coelho likes to think of a global smash hit. ‘I want to create billion pound businesses. There aren’t many, but that’s what I try to do,’ he says.
Over the next six to nine months, Coelho expects Balderton to make a number of exits. Lovefilm and cash acceptance network Alphyra are two notable examples.
As a rule, a significant minority stake of above 20 per cent but below 30 per cent is taken in a business. While at Intel, Coelho devised a checklist that he uses to this day: ‘I simply ask: what is the business? What are they doing? Is its intellectual property protected? Who do they sell to? Who are the people buying? Why is it important? Why will it become a big business?’
Coelho is a natural when it comes to putting people at ease, which serves him well in his line of work. He vehemently believes in passing on knowledge and expertise to the Schultzs and Schmidts of tomorrow, evidently not getting too carried away by his own successes.
It seems that he’s never forgotten The Who’s Entwistle all those years ago and the fact that the famous musician wasn’t too self-important to take time out for someone who was on his way up. Coelho may not have scaled the heights in music, but that hasn’t quashed his passion.
In fact, he’s in a band, playing bass, performing a gig for a wedding on a Sunday afternoon. ‘We play rock ‘n’ roll and jazz,’ he says, smiling.
For all his external languor, you don’t achieve what Coelho’s done without guts and determination. For him, not succeeding isn’t a sin, it’s not trying that can’t be forgiven. He says: ‘I blackball no-one. You can’t do that. A lot of the junior people I’ve mentored have ended up as big names.
‘Everyone has to start somewhere and making mistakes and falling over every once in a while is part of that learning process.’