Venture capital (VC) investments in the UK and Ireland are growing, with over £464m invested last year in young and start-up companies. The biggest growth was seen in small deals.

Stuart McKnight of Ascendant

The biggest deals last year were Ion Trading (£23m), Ubinetics (£14m), Mobileway (£12.5m), Fonebank (£12m), Icera (£12m) and Equinox (£11m).

“It’s much easier to raise £3m or more than £3m or less," said McKnight. That’s because a £3m-plus investment suggests either a company which is at a more developed stage than a company attracting a sub-£3m investment, or it suggests a company with a richer IP asset base.

“Mostly we see investors looking for developed businesses – businesses with over £1m in turnover, or perhaps a bit more," said McKnight.

Nonetheless, 58 per cent of the high-technology VC deals done in the UK and Ireland last year were for less than £3m, according to McKnight.

Ascendant points out that almost half the VC investments last year were in the software sector. Another big area for investment in 2004 was alternative energy companies.

In the semiconductor sector, the biggest deals were Icera, CRLO Displays (£10.6m) which develops and manufactures silicon-based micro displays, Artimi (£7.5m), the UWB specialists, Aspex (£5.6m), which designs ICs for the digital image processing market and Polatis (£5.1m), which is developing all-optical switch technology.

In the new materials and nanotechnology sector, companies which raised money last year were the nanoparticle specialist Oxonica, the Irish display start-up nterra, the alternative storage company Nanomagnetics, and the nanoporous metals specialist Nanotecture. In January this year Plastic Logic raised $8m.

The busiest investors last year were 3i, SEP, Amadeus, Benchmark, Cazenove, Doughty Hanson, Quester, Sigma and Accel.

Although 2004 was a good year for VC investment in high-technology companies – with £464m invested compared to £429m in 2003 - it is still a long way short of what was being invested at the peak of the market.

"In 2000, over £3bn was invested," pointed out McKnight. "In Q4 2000, 150 VC deals were completed, with 70 deals done in November 2000. Now we’re looking at about eight to ten deals a month. The world has changed significantly."

Just for semiconductors, on a worldwide basis, VCs invested $20bn in chip start-ups last year, and 250 IPOs were achieved. In the peak year of 2000, the figures were $106bn invested, and 385 IPOs.

smcknight@ascendant.ltd.uk
www.ascendant.ltd.uk