Venture capital in £1bn UK and Irish tech push
By Philip Stafford and Tim Bradshaw
Published: February 9 2009 02:00 Last updated: February 9 2009 02:00
Venture capital investment in UK and Irish technology companies last year hit the highest level since the dotcom boom ended in 2001, apparently shrugging off the pressures of the economic downturn.
Ascendant, an adviser to smaller companies looking to raise money, has calculated that just over £1bn was invested in the sector last year - up 15 per cent on 2007 - in 253 deals, compared with 242 deals in 2007.
But the reasons behind the volume of investment are sparking scepticism about the prospects for this year. Many of last year's fundraisings were follow-on financing rounds for companies in which VCs had already invested.
With little chance for VCs to exit their investments via flotations on London's dried-up junior Aim market, many felt obliged to top up their commitments. The scant availability of bank funding amid the credit crunch compounded the situation for many VC companies.
"Because it is a terrible environment for exits, a lot of VCs have reallocated more money to portfolio companies to protect them," said Fred Destin, partner at Atlas Ventures, a prominent technology VC.
Stan Boland, chief executive of Icera, which makes chips for mobile phones and raised £67m in two rounds last year, said: "VC firms were not going to invest in companies they were not already committed to."
Figures for VC financing activity in the fourth quarter of last year - when the number of deals tailed off - support the theory that 2008 was a blip.
Balderton Capital and Accel Partners were among the most active in the market late last year. Overall, however, there was nervousness, executives say.
Icera was among 2008's largest fundraisings, followed by SpinVox, which raised £50m, and Arts Alliance Media, which raised £39m.
Internet, wireless services and software had the greatest growth, taking £279m, up 66 per cent, while software investments rose 41 per cent to £223m.
However, clean technology investments dropped 37 per cent.
Copyright The Financial Times Limited 2009
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