MICROEMISSIVE Displays, a spin-out from Edinburgh and Napier universities, yesterday announced that it had closed a (pounds) 4.7m third-round funding deal – one of the largest venture capital dealsthis year in the embattled European opto-electronics sector.

MED, which last year hit the headlines when it built the world’s smallest television screen, specialises in high-quality, light- emitting polymer-based microdisplays that are the quarter of the size of a postage stamp, with potential initial markets in digital cameras and camcorders.

The fundraising, a combination of venture capital and lease financing, was led by Scottish Equity Partners, which also led the company’s second-round funding package in March last year.

SEP was joined this time by a syndicate of existing and new investors, including BASF Venture Capital GmbH and 3i.

Gary Le Sueur, associate director of SEP, said: “We believe that MED is now well placed to challenge the ubiquitous LCD microdisplay technology and be first to market with a lower power, higher- quality microdisplay which consumers will find very appealing.”

Dr Jeff Wright, the company’s co-founder and chief technical officer, said the investment would be used to fund the mass-market production of its products, most of which will be manufactured in Scotland.

“We’re hoping to sell our first products in the first quarter of next year, with volumes in the tens of thousands,” Wright said.

“The big market is Asia, where most of the camcorders and digital cameras are made. We’ve already sold some development kits, which is a typical first stage for early-stage technology companies and very encouraging.

“We’ve also held discussions with about 30 companies in Taiwan and Japan over the past 12 months, who are extremely interested in our technology.”

Wright added that the company, which currently employs a staff of 22 at its base at the Scottish Microelectronics Centre, in Edinburgh, expected the workforce to rise to at least 30 by the middle of next year.

He also predicted MED would break even in 2004, but declined to be more specific – except to say that it was “dependent on volume production”.

One industry observer said: “I can’t think of a bigger deal in the opto-electronics sector this year and it’s certainly good news for the sector – although MED is not directly involved in the telecommunication side of opto-electronics, which has been particularly thrashed over the past couple of years.”

The company, founded by Wright and Dr Ian Underwood in 1999, also sees applications for its technology in enabling video, full web pages, or high-resolution still images to be viewed on portable consumer products without appreciably reducing battery life.

Microdisplays are also expected to have application in 3G mobile phones, toys, headsets for wearable computing, and a wide range of other headset products.