London's High-tech Businesses Top Euro Venture
Anon
08-Nov-06
London has the largest cluster of high-tech venture capitalbacked companies outside the US, according to a new report published by gateway2investment (g2i).
Last year 380 London-based companies – two thirds of them operating in the technology sector – received a total of £450 million venture capital investment. London’s total represents almost 20% of the £2.5 billion invested in Europe as a whole and is on a par with the whole of France (£460 million) and well-ahead of Germany (£360 million).
But while London may lead Europe, when compared with the US position it appears the capital has considerable room for improvement. The new g2i report says in 2005 a bumper 35 per cent of the £12 billion venture capital poured into US coffers was invested in Silicon Valley – nearly 10 times the amount invested in London.
Although London is demonstrably more successful than the rest of the country in raising larger amounts of investment cash – 40% more than the national average or around £6.35 million per firm, according to Library House data – the crucial difference is in the size of the deals.
The report, entitled ‘London – Anchoring European Technology Investment’ - notes that while London firms receive, respectively, some 55% and 45% more than the UK average in first and second institutional funding rounds, they fare less well when it comes to the earliest investment stages. While these higher than average investment figures are partly attributable to factors such as a company’s age and sector, g2i argues that the powerful cluster effect gives London four key advantages at first institutional investment rounds:
- Clustering of technology firms breeds a large pool of start-ups and investors and encourages deal tension. London-based entrepreneurs have more bargaining power than their counterparts outside the capital and this both increases valuations and raises the size of institutional funding rounds.
- A high concentration of firms and investors helps build an investment community of potential syndication partners and encourages more dissemination of information on new investment opportunities.
- Location, location, location. London’s position within easy reach of road, rail and top airports eases domestic and international travel. Oxford and Cambridge – two of the UK’s key innovation hubs outside the capital – are both just an hour away by train, making London a logical base for inward European investment.
- Support from the Regional Development Agencies and other Government bodies has been rationalised into a strong and coherent framework with clear points of contact for both investors and start-ups. The growing cluster of UK technology firms can only fuel expansion of these support services.
London has seen a strong history of exits in recent months, says g2i, which not only helps raise the city’s profile in the eyes of potential investors, but ensures that current investors enjoy attractive returns and can invest again. To many small start-ups, it adds, AIM is now a viable alternative to late-stage investment.
“This report shows that the importance of London as a centre of investment for growing companies and particularly for technology companies should not be underestimated,” says Sarika Patel, Director of Enterprise and Technology at Grant Thornton and g2i Board member.
“It is fantastic that the capital has developed such a strong lead because of the economic benefits it brings. But the challenge remains to maintain and build on its position at the centre of UK and European technology investment by continuing to provide investment opportunities and returns.
“Recent exit activity, as well as future investment opportunity, looks set to sustain interest in London and maintain its position of anchoring European technology investment for the foreseeable future,” she concluded.
European Venture Capital Centre and Innovation Centre for IBM in Dublin
Minister for Enterprise, Trade and Employment, Micheál Martin recently announced that IBM Corporation is to establish a European Venture Capital Centre and an Innovation Centre at its Technology Campus in Mulhuddart, Co. Dublin, in collaboration with IDA Ireland and Enterprise Ireland.
The IBM European Venture Capital Centre will become a focal point for Irish technology start-ups seeking to gain to visibility within the venture capital community and coupled with Enterprise Ireland support, will further enhance access to venture capital investment. It will build stronger ties with the venture capital community across Europe and allow them to gain insights into emerging technologies, exchange market trend information, and accelerate innovation. It will also facilitate access for Irish start-up companies to IBM strategy, technology sharing and mentoring. The Centre will also act as a portal to IBM’s in-house partnership programmes and research activities.
The Innovation Centre is one of 32 IBM Innovation Centres worldwide which will help Irish software companies to leverage support from IBM experts in developing and testing new advanced and emerging technologies. IBM technology experts will also provide information and support to Irish companies in the form of workshops, seminars, access to design, scalability testing, porting and enablement services. The Innovation Centre will also channel start-up businesses to IBM’s centres of competencies in the areas of SAP and Service Orientated Architecture (SOA), a technology for transforming software applications into reusable services.
It was also announced that IBM Corporation will invest €46 million in its Technology Campus in Mulhuddart to significantly grow its Dublin-based software development operations, establish a business incubation centre and enhance its supply chain capacity with support from IDA Ireland.
Martin stated “The Venture Capital and Innovation Centres will act as catalysts for innovation, new company creation and growth and will make a valuable contribution to the culture of entrepreneurship in Ireland. This new investment shows how IDA Ireland and Enterprise Ireland, in collaboration with globally integrated businesses can create opportunities for our strong base of indigenous companies while also enabling our key multinational companies like IBM to achieve their corporate goals. Today’s announcement is a fitting way to celebrate IBM’s 50th anniversary in Ireland.”
AstraZeneca PLC
Acquisition Drive Announced in London on 8 October, AstraZeneca PLC has ramped up its 5 bln usd (2.67 bln stg) acquisition drive by inviting more than 60 venture capital firms to pitch companies they think the FTSE 100 giant would want to buy, The Independent on Sunday reported.
The one-day event, held in October, was the first AstraZeneca has held and underlines the emphasis placed by chief executive David Brennan on acquisitions as a way to fill the drugs giant’s thin pipeline of new treatments, the newspaper said.
Brennan has said in the past that the company has up to 5 billion USD usd to spend on biotech companies and licensing deals.
More than 30 AstraZeneca executives, including Brennan, attended the all-day affair at the Innovation Centre near Tottenham Court Road in central London.
Adobe jumps into the venture capital world
Adobe has big plans to get back into the Venture Capital market by announcing a $100,000,000 venture fund that will be available to innovative companies using Adobe technology. According to the company, the fund will focus specifically on Apollobased applications. Apollo is Adobe’s still-in-alpha runtime for bringing cross-platform Rich Internet Applications to the desktop.
On top of the news of the fund, they showed off Apollo applications by MySpace (a version of their IM client) and eBay (a bid management tool running on the desktop). They also showcased an innovative word processor running on Flex, built by the team at Virtual Ubiquity.
Adobe has high hopes for their Apollo technology and betting a lot on this. Certainly $100,000,000 in seed capital is a good indication of that and this should generate serious interest from many new start-ups in cross applications using Apollo. The next few months to a year should be very exciting for the team over at Adobe! Press Release Source: Thomson Financial; The National Venture Capital Association
US Private Equity Fundraising Recedes in Third Quarter of 2006
Buyout funds continue at record pace as venture funds slow
NEW YORK, Oct. 16 / PRNewswire-FirstCall/ -- After an exceptionally robust second quarter, private equity fundraising levels receded in both the venture capital and buyout asset classes in the third quarter of 2006, according to Thomson Financial and the National Venture Capital Association (NVCA). In Q3, fifty-two venture capital funds raised a total of $4.90 billion and thirty-two buyout funds raised $22.86 billion.
“At a time when there is a great deal of discussion about whether there is too much money entering private equity, this quarter’s lower fundraising levels, particularly on the venture capital side, are both expected and welcome,” said Mark Heesen, president of the NVCA. “We are nearing the end of the three year fundraising cycle which will raise approximately $75 billion for venture capital firms. Most venture firms have raised their funds and are now actively investing with a 5-7 year horizon in mind.”
Venture Capital Fundraising
Early stage venture capital funds were the most active in the third quarter with twenty-seven funds raising $3.5 billion. Eighteen balanced stage funds raised $1.1 billion. Domain Partners VII represented the most money raised in the quarter at $700M. In second place, M/C Venture Partners VI raised $550M. Follow-on venture capital funds continued to be the dominant fundraisers with 43 funds in the quarter. Nine new funds also raised money in Q3, accounting for 17% of the total number of funds raised.
Buyout and Mezzanine Fundraising
Despite the lower level of fundraising in venture capital, buyout and mezzanine fundraising continued at a strong pace, raising over $22.86 billion this quarter. Despite the absence of mega buyout fundraising this quarter, buyout and mezzanine funds remain on track to surpass the 2005 fundraising total. The leading buyout fund was First Reserve Fund XI with $7.6 billion. Thomas H. Lee Equity Partners VI, L.P. follows with $2.2 billion raised this quarter.
“Despite the third quarter decline, it looks to be a record year for private equity fundraising as a whole. Fundraising is still on track to surpass the full-year 2005 totals as well as the combined fundraising totals of 2002, 2003, and 2004,” said Alex Tan, Global Private Equity Research Manager for Thomson Financial. “While this is being primarily driven by the buyout market, the numbers suggest a continued appetite by limited partners for the private equity asset class as a whole.”
