PracticeConsultingE-business: ‘Market will pick up’

E-business: 'Market will pick up'

The venture capital market is looking forward to a mini-boom, following last year's crash.

Venture capital backing for the hi tech start-up market is set to pick up again after a slowdown following the market’s crash earlier this year, finance experts claim.

Cash to prime new start-ups and provide second round funding is likely to exceed the record £1bn invested in 473 hi-tech companies last year.

Corporate finance partner at Pannell Kerr Forster, Clive Brook, said: ‘Money for funding the sector hasn’t gone away and the market is very active again after a lull between April and June’,

Last month a PricewaterhouseCoopers report showed that internet company burn out rate – the time it takes to run out of cash – had improved to 20 months compared to seven months last December due in part to venture capital.

Brook said: ‘There is no shortage of cash wafting around out there, but it can be a problem accessing the fund sources.’

A new guide by Brook has compiled UK sources for financing hi-tech businesses, with companies ranging from large houses such as Apex Partners who marshal £7bn worth of funds to smaller incubator funds such as Oxford Science Park-based Seed Capital. It has £12m invested in start-ups in the Oxford area.

The largest funds listed in The UK guide to early stage technology finance include Schroder Ventures with £4.6bn invested worldwide and 3i, with £4.5bn in the UK and Europe.

Smaller players include regional funds such as Scottish Enterprise who manage #25m worth of funds in the private and public sector, and e-Capital whose portfolio includes 33 hi-tech companies backed with early stage start-up and seed capital funding.

Brook said: ‘The big houses haven’t been directly involved in incubator market but the amount of venture capital funds are rising so fast, some of that proportion must leak down to incubators.’

3i last week also invested £3m into Sport First, Britain’s only national sports newspaper, to increase the paper’s marketing and editorial budget, while Oxford Technology 2 VCT pumped £200,000 into Acumen Business Solutions Limited to support the development of its file tracking document management solution known as Aware. ‘There is a tremendous interest in the hi-tech sector from our members,’ said David Thorp, British Venture Capital Association’s chairman.

‘Venture capital involvement in rapid growth hi-tech companies can only grow. There are half a million small to medium-sized businesses out there and at the moment we back just 400.’

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