'GEIF Ventures sets the standard for early funds'

Free Radicals Feature - April 2004

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A business angel co-investment fund established and managed by financial services group NW Brown Group Ltd in Cambridge is to date by far the most active of the six funds started with cash from the DTI's Early Growth Fund to help support young technology companies across the regions.

By April 2004, a total of nine companies with a 10th soon to be completed, have received funding from GEIF Ventures, said Hugh Parnell, a director of both the NW Brown Group and of the Great Eastern Investment Forum, whose business angel members GEIF Ventures co-invests alongside.

The DTI's intention last year was to start a series of funds, focusing on SMEs, which would be the 'smaller brothers' of the nine much larger Regional Venture Capital Funds in England.

Under the scheme, GEIF Ventures received an initial £2.5m and this was recently supplemented with a second £2.5m from the DTI. Government thinking behind the scheme is simple: the funds would co-invest in high potential small firms - following on directly from and triggered by funds put into the companies by business angels.

Co-investment - At the launch event in Cambridge last year, NW Brown Group's founder Nigel Brown said the principle of co-investment - so lacking in the UK - had been a factor in the success of US firms. "The Great Eastern Investment Forum selects and vets companies before they are allowed to present to business angels to ensure each is both a top-quality investment proposition and appropriate for our investing members", said Hugh Parnell. "GEIF acts as a support service," he added, "the concept of a pre-qualified deal flow allows angel investors to focus and facilitates them making investments. The success of co-investing is that business angels decide in whom to invest - and we can augment them by being, initially, dependent and supplementary investors with follow-on rights for subsequent rounds."

The ninth deal, shortly to be signed by GEIF Ventures, provides cash for a Cambridge-based electronics company and the tenth, to a London-based chip firm, is under review.

NW Brown Group - As founders and organisers of GEIF, the NW Brown Group has a history and track record in managing the investment and business development requirements of small technology firms. It is accepted as a serious partner by local funding agencies and individuals. "The Group has a diverse range of activities and is now 30 years old so is perceived as part of the Cambridge establishment," said Hugh, "and this gives us a certain presence in the Cambridge scene."

Slow progress on regional funds - In the other English regions, however, progress on the Early Growth Funds has been hampered in part by a lack of interest, and partly by a shortage of suitably high quality companies. By March 31st this year, six have been established, with a further three planned.

One is the London Seed Capital Fund, which invests alongside the London Business Angel network Olban, also known as OneLondon. A further fund has been launched by the leading early stage investor e-Synergy, which has co-opted to invest with the London Development Agency and other London-based groups. e-Synergy's Investment Readiness Programme is seeking to groom young SMEs in order to render them fit for future investment.

"GEIF angels have made it possible for us to invest in nine deals in our first year of operations," says Max Bautin, project manager for the fund, "which is significantly more than the investment activity of other funds, including those established up to six months more us."

In the last year GEIF Ventures has invested a total of around £800,000 alongside £2.6m of private investment. Portfolio companies include Artimi, Novacta Biosystems, OnRelay, Quotient Diagnostics, Reality Telecom, Spice Inns, Transversal and Visit4Info.

"The success of our portfolio companies is encouraging," said Max. "Not only are many achieving high revenue growth rates, their success is also recognised externally. OnRelay's MBX technology recently being named as global 'Application of the Month' by Cisco."

Funding shortfall for mid-sized firms - Despite the continuous flow of solid technology firms starting up in the Cambridge cluster, it is not all good news. Hugh Parnell sees a funding vacuum in the UK for longer-established mid-sized firms. "They often cannot access development capital to get them to the next stage," he said. "They are well below the radar of private equity firms in London - and also spurned by the banks. This problem needs to be tackled if Cambridge is to build big firms of global status."

How to contact us - If you have not yet received commitments from GEIF-member business angels, you need to contact Andrea Blakesley, GEIF Director on 01223 720213 or andrea.blakesley@geif.co.uk to discuss the application and review process.

If your company has already presented its proposal at a GEIF Presentation Day, received commitments from GEIF angels of over £25k and, with the assumption of GEIFV potential investment and other sources, has reached its minimum fundraising requirement, contact Max Bautin of GEIF Ventures on 01223 720 227 or geifv@geifventures.co.uk See www.geifventures.co.uk for more information.

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