Georgina Prodhan and Foo Yun Chee

ATHENS: Luxemburg-based Internet telephony firm Skype has shown that Europeans can build a $4 billion company in just over two years, but venture capitalists are wondering if it was a fluke or the start of a trend.

Talent scouts gathered at the high-profile ETRE technology conference in Athens expressed optimism that European technology firms could be on the up again.

"There are huge opportunities. It's only limited by our own creativity. Skype was actually a bellwether for a lot of European companies," said Tim Draper of venture capital fund Draper Fisher Jurvetson, which helped finance Skype.

He basked in the envy of other financiers, even leaping onto the stage to read an "Ode to Skype" to the company's co-founder, Niklas Zennstroem.

Skype, which has developed free software for free phone calls over broadband Internet connections, was sold to eBay for close to $4 billion last month. Financiers said similar success stories could be around the corner.

"I think there are many other Skypes in the making," said Maurizio Caio, founder of TLcom Capital Partners, which manages $200 million.

At ETRE many young companies touted innovations ranging from SMS advertising methods to identity-theft protection software to investors.

Scanbuy from Spain offers software that allows camera phones to function as bar-code scanners, while Proxilliant from Sweden has a technology to improve the quality of broadband cable.

Berg Networks from Spain promises a "Blackberry email experience", where customers receive their corporate email automatically on their mobile device, on non-Blackberry, and therefore cheaper phones.

"We plan to go to venture capital in the second round, probably in the middle of next year," said James Carroll, in charge of business development at Berg Networks.

BIGGER RISKS

Many of the financiers attending the four-day networking event seemed ready to take bigger risks again, with last week's sale of Skype fresh in their minds.

Caio said caution would bring few rewards. "If you throw peanuts, you get monkeys," he said.

"I would rather have a failing Skype than a successful, irrelevant company with marginal stuff that does not change anything," he added.

The success helps venture capitalists (VCs) to raise fresh funds. In the first half of the year, European VCs raised more than 200 million euros ($239.6 million) more than they did in the whole of 2004, according to a study by VentureOne.

Skype's astonishing return on investment -- Mangrove Capital Partners, which was also an investor, said it received 100 times what it had put in -- is reminiscent of successful flotations of eBay, Yahoo and Amazon in the late 1990s.

The joint investment in Skype from VC funds, which also included Bessemer Venture Partners and Index Ventures, was just $25 million. The success has wetted the appetite of many investors, which is a mixed blessing, Zennstroem warned.

Normally considered a shy character, Zennstroem took a swipe at venture capital firms, which he said in his experience had mostly only been interested in making a quick buck, not in the business itself.

"When they know you need them, they're not there," he warned today's start-up companies, cautioning them to beware of financiers who wanted to take control of their business for short-term gain.

Others believed, or hoped, that the irrational exuberance of the late 1990s was not making a comeback yet.

"Is the industry back? Yes and no," the manager of Goldman Sachs's high-tech group, Lawrence Calcano, told the first day of the conference, cautioning that more sober business models and less of the hype seen in 2000 were needed.

(Additional reporting by Lucas van Grinsven in Amsterdam)