Since then, we have moved (around the corner) and also set up a London East outpost in Shoreditch, within spitting distance of Silicon Roundabout — the centre of gravity of London’s (and increasingly Europe’s) entrepreneurial tech scene. In fact, we pretty much witnessed the birth of Silicon Roundabout when Moo CEO and founder Richard Moross moved into a semi-ropey building on Old Street Roundabout that had been slated for demolition. Richard took on more space than he needed and started offering desks to other startups looking and pretty soon he’d rented out all his extra space.

Old Street Roundabout was famously given the name Silicon Roundabout in 2008 by one of Richard’s new tenants: Matt Biddulph, who co-founded Dopplr. Dopplr (Nokia) along with Amee, Soundcloud and Tweetdeck (Twitter) were all part of the original gang in Moo’s offices and when Moo finally outgrew its Old Street office, they passed the torch and Huddle moved in. Moo moved to Scrutton Street, also in the heart of Shoreditch and this time we also took a few desks so we could spend a few days a week rubbing shoulders with some of Moo’s new gang like Groupspaces, Lanyrd, Lightbox and LevelBusiness.

It turns out we’ve been pretty active in London over the last 10 years.

We’ve invested more than £185m in over 40 startups. But while all these companies started small, many have grown up really fast. In fact, in just the last 10 years when you look across all our London investments well over 5,000 new jobs and close to £1.5bn in new annual revenues have been created.

London has really given us exposure to all ends of the startup spectrum.

We have been very active in seed, investing over £26m in 15 London companies over the last decade, including the likes of Moo, Moshi Monsters, PeoplePerHour, Seedcamp, Songkick and Stylelistpick. We’ve also been involved at the earliest stages with the likes of Funding Circle, Glasses Direct, Housetrip and One Fine Stay.

Just in the last 10 years, London has also nurtured a rich vein of international category leaders and stellar exits we’ve been lucky enough to be involved with including Betfair (LSE), Last.fm (CBS), Lovefilm (Amazon), Playfish (EA), Net-a-Porter (Richemont) and Skype (eBay). All of these companies were happy to call London their home, but we believe for London – and Europe – we are just at start of creating world-beaters. We see a whole new wave of London companies like Alertme, ASOS (LSE), JustEat, King.com, Moshi Monsters, Mimecast, Viagogo and many others like Badoo, Moneybookers, Spotify and Wonga are all capable of enormous outcomes and taking a fundamental place on the global tech map.

London has some really special characteristics that we love and can really relate to.

Firstly, it is truly international which fits who we are: Canadian, Czech, French, Italian, American, South African, Swiss, Swedish – and oh yes, British. It also fits the profile and the mindset of the entrepreneurs we like to back who have also come to London from all four corners of the world.

Secondly, London is truly a creative, commercial, financial, media & marketing powerhouse on a global level. Now that it’s starting to get tech and become one of the world’s great entrepreneurial capitals this is a truly powerful cocktail and as such London has definitely become our firm’s centre of gravity.

We see the evidence building every month: the buzz around Songkick’s Silicon Milk Roundabout, Google’s recent decision to build a major campus in Shoreditch, stronger links to Silicon Valley (which we are delighted to help enable with Danny and Mike on the ground in San Francisco) plus of course the Mayor and the UK government’s efforts to recognize the importance of tech startups as an essential driver of growth.

We’re super excited about the step change we’ve seen over the last decade and now have 11 partners actively making investments In London from early-stage (Ben, Bernard, Robin, Saul, Simon and myself) to growth (Dom, Giuseppe and Jan) and life sciences (Francesco and Kevin). We love London and are honoured to have played a part in its astounding tech emergence. If the last 10 years are anything to go by, we can only be excited about what the next 10 will bring us. Strap on your cycling helmets!

One area where we are committed to enhance our proposition to entrepreneurs and invest more time and money is the Nordic and Baltic area.  Index Ventures has already invested a disproportionately high share of funds and time here relative to the size of the markets.  Here we reflect on what Index has been up to in the region, and just why it creates so many innovative and successful tech companies.

I met with Anthony Goldbloom and Jeremy Howard for coffee on a Sunday when I was passing through San Francisco, and yes it was one of those meetings that is supposed to be 45 minutes and ends up being 3 hours. It was also one of those meetings that makes you smile on your drive home because it reminds you why it is such a privilege to be in the business of helping entrepreneurs fulfill their missions.

Kaggle is a big data company that allows enterprises with vast amounts of data to get the best data scientists in the world to uncover hidden relationships in their data and produce superior predictive mathematical models. It exploits the fact that the people with the data are not necessarily the people with the best skills to see patterns in the data or build algorithms to model them.

As a web-based marketplace that connects data owners with data scientists, Kaggle exploits the power of interdisciplinary collaboration. In one real case, a glaciologist was able to do a better job of seeing patterns in radio telescope data than the NASA data scientists who submitted them. Kaggle allows research institutes (like NASA or the Royal Astronomical Society) and companies (like Allstate, dunhumby and Deloitte) to sponsor competitions in which data the 17,000 data scientists who have already signed up on Kaggle, compete to come up with the best predictive algorithms for their data.

We see Kaggle at the intersection of three major trends: the universal recognition of the gold hidden in big data and the imperative of finding better ways to extract it;  the growing willingness of enterprises and institutions to entrust mission critical work to talent in the cloud, and the increasing dominance of web marketplaces. Granular, relevant, real-time data is everywhere and not a day goes by that one doesn’t come across a process or a transaction that couldn’t be improved by a better algorithm.

Kaggle builds on our investments in Factual and The Climate Corporation which use a variety of tools to tame the big data beast and bring tangible value to corporations and farmers, PeoplePerHour and Stack Exchange which leverage the limitless know-how and expertise of cloud talent and experts and Just Eat, Etsy, Shapeways, Housetrip and Funding Circle among other marketplaces of various shapes and sizes.

Kaggle’s plan to refine and scale it’s offering to enable hundreds of businesses, institutes and agencies to leverage the collective expertise of the world’s best data scientists is extremely compelling to us. The impact that Kaggle can have by tackling some of the world’s biggest data problems was also not lost on Max Levchin who is becoming the company’s chairman, bringing his phenomenal experience as an entrepreneur and as an innovator. We are very excited about working with Anthony, Jeremy and the talented team they have already begun to assemble, as well as Vinod and David who have joined us in leading this investment, in the wake of other exciting Index/Khosla Ventures collaborations Boku, The Climate Corporation and AdMarvel. While a business that originated in Australia and has moved to San Francisco from where it intends to address a truly global market may feel rootless to some, it feels very familiar to us.

We’ve had a relatively short relationship since we were lucky enough to have been introduced 12 months ago by Yossi Vardi in Tel Aviv, but it’s been an absolute pleasure and privilege to work with Ron, Erez, Matan, Maya and Eyal as they set about defining the landscape for social commerce from a small but killer office above an awesome restaurant on what has become the most famous road in Israel in the last 12 months.

There are lots of changes afoot in the start-up nation and this team (killer), their mission (huge) and their approach (lean) is symptomatic of a much larger wave that I believe we will start to see rolling in the next 5 years from Israel. Spending the last 12 months in Herzilya has been a massive education for me personally and professionally – it’s been thrilling to get a much closer insight into one of the true gems of the global technology ecosystem.

eBay are both very smart and lucky to have these guys on board – and having been through the experience myself of working as part of eBay after the (first) Skype acquisition in 2005, I know how much you can learn as entrepreneur and operator being part of one of the world’s defining technology businesses. I first met some amazing friends in that time and learnt from some of the smartest and best people in the business.

We’ve made nearly 30 investments through Index Seed in the last 20 months (yes, we are due for an update!) and fellow travellers have always been a big part of our approach, so we were thrilled to partner with Yossi Sella and Gil Dibner at Gemini on this deal.

So Kol HaKavod to all involved and looking forward to many, many more waves of such positive, socially inspired light coming out of Israel.

We are incredibly excited for Sheng and his colleagues at Cloud.com.  They have been working hard at this for close to 3 years, and can claim a major victory.  When we invested in Cloud.com 1.5 years ago, VMOps (as it was known back then) had seized on the notion that if Amazon was having so much success with EC2, many other companies with data centers – both private and public – would be interested in building a cloud of their own.  Public hosting companies would want to roll out a datacenter-as-a-service that would compete with Amazon.  Private data centers could be deployed and managed more effectively as a cloud as well.  This vision turned out to be prescient as many customers flocked to Cloud.com to try and ultimately deploy these clouds.

Cloud.com was not the only company to have this vision. In fact, they weren’t the first.  But, by developing a flexible platform called CloudStack which could rapidly add new features and by responding to customer needs, Cloud.com won customers – one-by-one…..Tata Communication, KT, Zynga, IDC Frontier.  Gradually, over a period of 2 years, Cloud.com became the leader in this market.

Our hats go off to Citrix who have brought on board the leading product in cloud computing created by a fantastic team that has executed flawlessly over the last 2 years.

While we are incredibly happy for Cloud.com and Citrix, we also believe that the market around cloud is just getting rolling.  Many forward-looking businesses have adopted EC2 and other cloud environments, but mainstream adoption is well ahead of us.  We believe that the large majority of applications will be developed for and hosted by clouds.  The benefits of moving to the cloud are massive for small and large businesses alike.

That said, we still believe there are many interesting challenges and opportunities in the cloud – some of these will hopefully create the next Cloud.com:

• Enabling enterprises to easily migrate/rewrite their applications for a cloud environment – many of the applications on clouds today are developed for emerging web-related applications.  But, there is a massive market out there of legacy applications developed for traditional environments that are poised to migrate to the cloud.

• Allowing applications to exist in hybrid or multi-cloud environments – whether for resilience or for cost reasons, users of cloud will want to mix and match between cloud providers or perhaps their own clouds.  Making this simple and easy will increase the attractiveness of cloud usage.
• Managing the security of data and applications in clouds – for many enterprises – especially the larger ones – the idea of placing critical data access in a cloud somewhere outside of the corporate boundary is still a gut-wrenching thought.  Security solutions that alleviate these concerns – either via data encryption, VPNs, or access control will be very important to address this issue.

• Ranges of new SaaS application that enterprises will develop for themselves – thousands of custom applications are developed for many different kinds of businesses today.  A new breed of applications will be built by IT departments in the cloud and will run on private/hybrid clouds.  While consumer applications lead the way in cloud usage today, many of these internal IT applications will be reconstituted as SaaS and launched on clouds.

• Broad-based usage of big data applications like business intelligence, transcoding/streaming, data mining & analysis – undoubtedly, these types of applications – headlined by Hadoop – will be big beneficiaries of cloud infrastructures.  Making it simple to take advantage of these relatively complex technologies will be a big opportunity.

The list is by no means comprehensive and many great new start-ups are already working to address some of these opportunities.  But, we certainly feel like cloud computing is a game changer.  In the late 80s and mid 90s, the computing universe brought us the client/server revolution.  The late 90s and early 2000s gave us the transformational wave of open source.  Today, we are seeing the rise of cloud, virtualization, and SaaS.  And, it’s a really big opportunity.

Over the years, we’ve had the chance to partake in these mega-trends at Index through companies like MySQL, Trolltech QT (Nokia), Pentaho, OpenX, Gluster, Rightscale, StorSimple and many others.  As we close the chapter with Cloud.com, we send hearty congratulations to Sheng and his team and thank them for the opportunity to have been their partners.  We hope to work with many great entrepreneurs like them as we continue the great journey in the clouds.

Fast forward 15 years to today, the IP networking business is a $40B+ market with routers and switches canvassing private and public data centers, enterprise networks and operator networks around the world.  In parallel, over the last few years, the computing platforms that the networks connect have transformed dramatically.  “Hosts” as servers and client were referred to in networking-speak have gone from physical assets in the enterprise premise to virtual compute utilities in the cloud.  The revolution in computing lead by VMware and Citrix’s virtualization technologies have transformed the concept of servers completely and made them a manageable utility  - the way electricity or water work for us at home.

Yet, networking over the last decade, IP networking has not quite kept pace with that speed of innovation.  Networks are still generally built with the same basic addressing and control mechanisms as were used a decade ago.  As virtual servers spawn across globally distributed data centers, network operators strain using their relatively static tools like Access Control Lists (ACLs) to keep up with the dynamic compute environment.  Networks still don’t really have an “API”.  Over my 14 years at Cisco, I saw a lot of interesting technologies come and go.  OpenFlow is as transformative as I have seen in the last decade..

Today, we are delighted to be joined by Khosla Ventures in announcing the funding of Big Switch Networks.  While networking has not been a fertile ground for venture investing in recent years, we are pretty excited about this company.  Big Switch is based on a core technology developed at Stanford University called OpenFlow.  OpenFlow is a fairly complex concept, but it essentially creates a “control layer” between the applications running in clouds or enterprise environments that allows networks to have APIs the way modern web applications do.  OpenFlow also speaks directly to switching chips that are OpenFlow compliant – essentially obviating the need for complex software on classic switching platforms.  And, while networks are traditionally built as a collection of independently managed switches, OpenFlow essentially allows for a single controller to provide flow information to a large number of switches, turning a network into one…..  Big Switch.

We are also very excited to be able to back two terrific founders in Guido Appenzeller and Kyle Forster.  Guido is a repeat entrepreneur who also was the consulting professor at Stanford that lead the OpenFlow developments.  Kyle Forster is an old friend from Cisco who I’ve had the privilege of hiring a couple of times in my career.  Together, they give birth to Big Switch with a healthy degree of skepticism for how things have been done in the past, but also the due respect of a matured and developed industry that allows the Internet to reach the corners of the world today.   We were fortunate enough to be seed investors in Big Switch when it was just Guido and Kyle and are thrilled to be able to support them in the next phase of their journey

Vinod, Pierre, and Shirish at Khosla Ventures are no strangers to seminal companies in this industry…. I still remember Pierre roaming the hallways of Cisco when I was a newbie there.   I had the pleasure of competing with Juniper (one of Vinod’s many successes) for years.  And, of course, Shirish brings in the most recent success story in Aruba.  We feel privileged to be working the folks at KV on Big Switch.

It will be a long road before the IP networking industry is transformed from the way we know it today.  Then again, a decade ago, few people imagined that computing would be as thoroughly transformed by this unknown technology called virtualization.  We couldn’t be happier to be able to support Guido and Kyle at the beginning of this journey in the networking industry.

We got to know Sami during the investment process in Spring and Summer 2008. At the time Playfish was already one of the most successful gaming companies on Facebook, with titles like “Who has the Biggest Brain” rapidly growing to what at the time seemed very impressive metrics. We didn’t know then that just round the corner Playfish was just about to crack the code with Pet Society. This game reached millions of users and essentially defined the social game as we know it today.

Equally pioneering however was what Sami and the technical team were doing behind the scenes to support this growth. Way back in 2007, at the very early stages of the Amazon Web Services ramp-up, Sami had taken the decision that to build a Company which could keep pace with a rapid viral growth in usage, he would have to completely re-invent the technology stack. Essentially Playfish decided to go “all-in” on the emerging cloud services platforms. The decision to exclusively use Amazon, Rightscale, Google apps, Boku and other SAAS components not only proved vital in supporting the growth when it came, but also meant that almost all development resource in the Company could be focused on building great games not managing infrastructure. This pioneering approach is now essentially the de facto standard we see in all web startups. Over the following years Sami has kindly shared his opinions on technology and internet with us particularly around cloud services which has become a key theme in our portfolio.

We learned from our experience with Thai Tran (previous EIR who we have backed at Lightbox) that technically gifted EIRs are immensely valuable both for their insights and leads. We also know that they tend to follow parabolic rather than elliptical orbits – so we look forward to working with Sami for as long as are able to hang on to him!

For the 100 years leading up to American independence, the rivaling superpowers of the day were England and France.  While the Americans had the closest historical ties to England, the French were a premier nation.. But, France had recently faced scarring defeats at the hands of the English in the Seven Years’ War.  The American leaders needed a great envoy to convince King Louis XVI to join forces with them.  They chose Benjamin Franklin : so, he got on a ship and went to Paris…. to do some Business Development work.

Much has been written about Benjamin Franklin and his effort to convince the French to partner with fledgling United States.  Interestingly, so many of the concepts apply well, especially in today’s Internet world.  By observing the circumstances of the time, entrepreneurs can learn what are the best practices in Business Development which are still applicable today.

Lesson 1: Who to partner with

The situation was clear.  France, the “Number 2” power at the time, had a healthy dislike and animosity toward the top power.  With a 440-year history of wars with England and reeling from the recent loss to the English, the French were intrigued by the idea of getting back at their rival.   They were the obvious ally for the Americans.

Here is the first lesson of Business Development.  A start-up’s natural partners are not the market leaders.  Generally, market leaders enjoy the inherent advantages of being the biggest and most powerful player.  They may have weak spots here and there, but, the natural momentum is to maintain the current state of affairs.  Hence, working with start-ups who have a disruptive agenda is generally not the obvious course of action.  The more natural ally of the start-up is the second- or third-place player who still has scale and power, but has an interest in changing the current order of things.

Take the example of Zynga in its early days with Facebook and MySpace.  While the two social networking superpowers were at war with each other, when Zynga started, it decided to put its eggs in Facebook’s basket.  Why?  Because, Facebook was the number 2 player.  They wanted to use the eco-systems forces to continue their growth and surpass MySpace – which was the leader in social networking at the time.  The partnership ultimately yielded big dividends for both, propelling the companies to leadership positions in the respective markets.

Lesson 2: How to work you partner’s organization

While France seemed like the obvious partner, it was actually rather difficult to convince them to join in the cause.  The French were ostensibly at peace with Britain and were reticent to make a bet on a start-up nation.  In retrospect, this may be hard to believe, but, the United States was far from the winning horse in the war with England.  The idea of supporting an uprising against a monarchy did not resonate well with King Louis XVI.  Franklin began by finding an advocate within the French court.  He found it in France’s foreign minister: Comte de Vergennes.  Franklin saw that Vergennes had a streak of independence in him and a love for the middle-class qualities of the Americans.

Lesson two in Business Development is to find your advocate in your partner’s organization.  As a board member, all too often I get the request from entrepreneurs to get an introduction to the most senior person I know in a powerful organization.  Entrepreneurs want to meet Larry Page, Steve Ballmer, or Mark Zuckerberg.  With their natural conviction and will power, founders believe they can convince anyone of how significant their company is going to be.  They often forget that these big-time leaders are awfully busy and have a few other things to worry about: like running their own company.   Not that meeting with these celebrity figures is the wrong move – it can work.  But, it is a low-probability option and one that can backfire by alienating the business development leader of the partners’ organization.

A better path is to cultivate a relationship with the right person in your ally’s organization.  Sell them, dine them, and allow them to be the hero by having discovered you.  Understand what their agenda is within their own company and help them become successful.  It is much easier for Chief Executives in large organizations to follow their own team’s recommendations, rather than to push down an unpopular view into the rank and file.

When I was responsible for business development at Cisco, many companies would sweet-talk John Chambers’ admin staff to have a meeting with him and pitch their company.  Inevitably, he would walk down the hall with Diet Coke and presentation in hand and ask me to have a look.  Sometimes, these were start-ups that we had already decided not work with (and had now managed to turn us off for a second time….).  Even if the idea was interesting, the fact that these companies had completely skipped the process and gone straight to the top did not ingratiate them with Cisco’s bus dev team, who now had to act as their shepherd through the complex organization.  The entrepreneurs that we got most excited about were the ones that came to us through recommendations of people we knew or that we somehow discovered.  The really good ones, allowed themselves to be discovered.

Lesson 3: Convincing your partner

Vergennes was a great ally for Franklin and the Americans.  He advocated supporting the United States to the French court.  He made the case that England was an aggressive and unjust enemy and that it was in France’s political and economic interest that England be crippled in this “divorce” from America.   Franklin employed one of the best strategies in Business Development to convince Vergennes and, ultimately, Louis XVI to support the US.  He appealed simultaneously to both their realism and their idealism.

The realism was a pragmatic thread of logic: it was in France’s best interest to have the English face defeat in this conflict.  Not only that, but the US was willing to give up a significant geographic slice (the Louisiana Territory) to interest the French in joining in the conflict.  The French clearly wanted to beat the English and the Louisiana Territory was like an option for future value: a potentially interesting one.

The idealism was really an appeal to the fact that America’s independence movement was one based on the moral virtuousness of freedom.  Why should America be bound by obsolete rules from a King from across the Atlantic Ocean.  How could France not join in this movement?  It was an appeal to the heart of the French rather than the mind.

In today’s world a similar strategy can work brilliantly.   Good business development deals have certainly elements of both realism and idealism.  Realism is about alignment of economic interest between two organizations.  Companies have goals they want to achieve: reach new customers, secure resources, tackle competition, ultimately creating more value of their stakeholders.   In the case of entrepreneurial ventures, the smaller company will often have a technology or other asset that the bigger company can use to its benefit.   In addition, the start-up has “option” value: an unknown economic value that could reward the stakeholder when exercised at a later date.  Not surprisingly, many of the more interesting business development deals involve the larger company taking an equity stake in the entrepreneurial venture.  The alignment of economic interests can be permanent or temporal – it is not mandatory that a business development deal last a prolonged period of time.  The parties involved can definitely strike an accord that is short-lived, but mutually beneficial.

Franklin appealed to the “heart” of the French in his negotiations.  This is a much more subtle and delicate strategy.  In today’s context, this is about selling the vision of the new venture to the partner organization.  Visions are amazingly appealing concepts.   Even the most pragmatic of gatekeepers want to be part of the creation of something significant.  It appeals to the human desire to aspire and the affinity to the “cool new thing”.   The vision can also be fortified with indicators of early success.  When you are small, it doesn’t take much to show 100% growth.  While, the numbers can still be small in an objective sense, growth and early adoption can be powerful reinforcements to a vision.  Faced with a compelling vision, early success and a sense of destiny, entrepreneurs can convince larger partners to embrace them as partners.

Lesson 4: Managing your partner

In 1777, the French were convinced.  They initially provided funds and weapons to the Americans, but gradually increased their support to their full troops.  America had acquired its powerful ally.  But, Ben Franklin did not turn around and come home.  In fact, he resided in Paris from 1778-1785.  While there, Franklin wove himself into the French high court and continued to maintain a high fidelity communication line.  Many historians attribute this continued presence as the secret to a successful partnership between the United States and France.

Business development professionals in today’s Internet era often forget the importance of relationship management that begins once the legals of an alliance are signed.  The agreement between two companies is just a starting point.  The relationship management role is critical for many reasons:  it ensures the coordination of efforts between the two parties; it smooths out misunderstandings and miscommunications; and it re-arranges the agreement as the context of the partnership changes over time.  In an ideal situation, it is best if the same person who originally architected the agreement also play the role of managing the relationship.  This was the case with Franklin and the French.  The power of this arrangement is that the authors of the partnership have the original context and principles under which the agreement was drafted, hence they can often overcome difficulties much more easily.  In the event that is not possible, however, it is still important that the two parties assign specific people to manage the relationship manage and maintain those resources in place for as long as possible.

There are often two problems with this: resource limitations (especially for a small company) and the fact that “deals” are organizationally rewarded, but relationship management is not.  On the resource limitation issue, the only answer is that this is an prioritization issue – how complex is the relationship to manage and how important is it.  The higher the complexity and the importance, the more critical the need to apply resources to it.  On the rewards issue, it is best to apply metrics or performance indicators to an alliance and reward both architects and managers of that deal when it is successful.  If those rewards don’t exist, the job of the relationship management becomes just a chore all too often.

We often pride ourselves for having tackled issues that no one else in the past has seen.  But, reality is that history often teaches us tremendous lessons that apply even in today’s world.  Emails have replaced messengers traveling on ships, encrypted keys have replaced waxed seals.  But, the principles of deal-making and relationship management in complex organizational contexts are very much the same.  It takes a lot of acumen and good process to get a business development deal done.  It takes patience and persistence to manage relationships.  Today’s Vice Presidents of Business Development can learn a lot from a man who flew a kite with a key on it 250 years ago.

A special note of recognition to Walter Isaacson and his book, Benjamin Franklin: An American Life which served as an inspiration for this post.

All the Index team will be spending time there and currently Neil, Mike, Robin, Simon, Ben and Saul all directly work with businesses in the neighborhood.