Sale of Lovefilm: A champagne moment for UK tech?
Lovefilm, the fast-growing movie rental firm, has been sold to Amazon - and the champagne will doubtless be flowing in London's venture capital community. After all this is the most profitable "exit" from a technology start-up for some time. It is also proof that the UK is a place where you can, in the words of Lovefilm's CEO Simon Calver, take a good idea, build it into a successful business and attract the attention of a global powerhouse like Amazon.
But should the rest of the tech sector be celebrating as another of its clever young companies decides it can only grow up under the tutelage of a giant American parent? Let's have a look at a couple of reasons to be less than cheerful about this deal.
First, the price. For whatever reason, neither Lovefilm nor Amazon wants to go public with this information but I understand the deal values the business at $312m or £200m.
It may sound a lot - but look across the Atlantic at a similar venture Netflix. It has been a huge hit with investors, and has seen its shares quadruple in value over the last year, giving it a market capitalisation of around $10bn (£6.3bn). Now it does have about 10 times as many subscribers as Lovefilm, and is much further down the road from a postal service to a digital download and streaming operation.
Nevertheless, Amazon has picked up the British business for around one-30th of the price of its US equivalent - which will look a bargain if Lovefilm does succeed in its mission to become a digital one-stop shop for movie lovers.
It also looks quite cheap compared with sales of other European tech firms to US businesses. In 2005 eBay paid $2.6bn (£1.4bn) to buy Skype. Nearly four years ago CBS paid $280m (£140m) for Last.fm, a music service which at that time had negligible revenues. And in 2008 the social network Bebo, another business which had yet to prove that it could make money, fetched $850m (£417m) from AOL.
Mind you, those purchases eventually proved either mildly disappointing or, in the case of Bebo, downright disastrous for the American buyers. So maybe Amazon is right to be cautious about over-paying for Lovefilm.
The bigger concern is the message sent out to UK and European entrepreneurs. Whereas the Mark Zuckerbergs of this world hang on in there, despite all invitations to sell up while the going is good, the founders of our smartest start-ups rarely seem to have staying power. Although you can understand the pressure from a venture capital community eager to make a return, it would be nice to see a little more patience.
But when I spoke to one of Lovefilm's founders and backers he told me it would be wrong to take a gloomy view. "We beat ourselves up a lot but this is a moment to celebrate," said Saul Klein of Index Ventures. As well as Lovefilm, he was also involved in getting both Skype and last.fm off the ground.
Mr Klein's point was that the entrepreneurs who had come out of those business were going on to start new business or to become angel investors. "To create a long-term sustainable ecosystem you need these companies that throw off talented people."
And he insisted that we should be more positive about our success stories. He pointed me towards an answer he had given to the question "Which London Internet start-ups are doing more than $10m in revenue?" on Quora, the hot new question-and-answer site. It was a long list, with impressive names like ASOS, Betfair and Moneysupermarket on it.
So maybe Saul Klein is right, and it does not matter who owns our best young web firms, as long as we keep creating new ones. But wouldn't it be nice if, just for a change, one of our start-ups got big enough to march over to Silicon Valley and buy one of their firms?