Tech startups across Europe are currently preparing their entries for Seedcamp 2008, the annual contest that offers five or so winners the chance to secure early stage funding and advice from a panel of expert VCs (in return for a chunk of equity).

But any not making it may not have to wait for another twelve months to get their hands on the organisation’s cash.

According to Reshma Sohoni, the chief executive of Seedcamp, the group is looking to make its first investments outside the contest next year:

“I still need to get approval from our investors to do it… but Seedcamp in 2009 will evolve so that we can invest beyond the main Seedcamp week.

“At the moment, all their stars have to align for startups to be ready for September, but there are other times when there are very promising ideas and companies. We’re looking at ways to invest in the other 11 months of the year and that should be pretty attractive to startups that need mentorship and funding outside of September.”

Sohoni – whose previous employers include 3i, Vodafone and Softbank – has been hitting the road in the last few months to promote this year’s competition to startups throughout Europe.

As with Seedcamp 2007 – its first contest – she says the group will invest a few thousand pounds in the winners this time around, in return for up to 10% equity. They will be provided with a three month mentoring programme, including advice on usability, project management, product development and marketing.

The money will be provided through a three year fund Seedcamp raised in 2007, although Sohoni says it may look for more financing this year to help target one-off investments.

She adds:

“We spent the first four or five months of this year, travelling across Europe and driving that message that Seedcamp is pan European; it’s not just a UK thing.

“We are based in London, so there is always this misconception about what we exactly are. People have put us in the competition category, but we do have a fund that we are using to invest and I have been trying to drive that message home. There’s been huge interest from teams all around Europe.”

Sohoni says five of the six startups that received funding last year are still afloat - a ratio that represents “really good numbers”. VCs essentially need one big hit out of ten investments to make their own numbers work, so that bodes well.

But over the next year, she says she wants to “help drive more ambition” among European entrepreneurs and support more original ideas. She thinks “people are starting to make the shift” but admits economic worries are making things tougher:

“It’s scary, on the one hand, that some basic goods are skyrocketing in price and the impact that is having. But on the flip side, there are some real needs out there that technology is fulfilling, and making easier and more efficient.

“I do think it is going to get more competitive for companies to raise additional round of funding, which is probably a good thing anyway.”

Despite these concerns, Sohoni says she is planning new formats for Seedcamp contests, including the potential for companies to get involved by challenging startups to solve problems faced by their own R&D teams.

This would mirror, to some extent, the X-Prizes that have been backed by brands such as BT and Google (albeit without the philanthropy angle): 

“We have been thinking about this a lot. We will probably look at mini-Seedcamps next year as a forum for that. Oracle and Microsoft, or other corporates, might have intellectual property in-house that they need people to develop, or they might have problems to solve for enterprise customers. It would be very powerful.”

There has also been interest in taking the Seedcamp brand to other geographical regions:

“I’ve been talking to folks in China and Australia, although we are careful about transplanting the brand too quickly. To take the brand across, I want to show some successes and that the model can work.

“Also, it’s important that there is an outlet once [startups] ‘graduate’ . We are a feeder into angel investors and VCs, so there would need to be a strong market, as well as exit potential.”

Back to September’s contest, and Sohoni says she anticipates a few changes in applicants’ focus from last year. She expects more B2B software providers to enter, as well as developers of new financial services such as portfolio management apps and games based around trading.

“I think last year we still saw a lot of social networks and e-commerce startups. In the past few months, we’ve seen a lot more developments around the semantic web.

“There are a lot of ideas around games, coming out of Ukraine and other geographies; including mobile and online gaming. In the Balkans, there are also a lot of developments around finance.”

For brands, Sohoni says semantic web services will ultimately offer “a step change” in targeted marketing and recommendation engines, but concedes “it is all pretty raw at the moment”.

“All of it sounds very similar right now, and in a very early prototype stage. It’s hard to know what the usable solutions are going to look like. But e-commerce players should start to read up on it and collect stories.

“It’s a bit early to choose a solution to implement, but it’s a good thing to get on the radar.”

She also has some advice for anyone thinking about applying to the competition this year:

“We learned a lot of lessons last year. Get a well-rounded team. It doesn’t have to be large, but have some real coders and at least one person that is business-oriented, or has both skill-sets.

“We also got a lot of bizarre answers to questions last year, so we put together some pretty detailed guidelines this year. So think through and answer the questions appropriately.

“Also, just be ambitious. Think globally and have a unique product. It’s a competition with 200 or 300 people, so something that’s focusing on a small market might have a difficult time passing through.”

Let us know if you’re planning to apply to Seedcamp, and good luck to all who do.