SCOTTISH Equity Partners, the venture capital group, yesterday said it expected a “very significant” upsurge in deal activity during the second half of 2003, but that over the past 12 months it hadstill bucked the downturn in equity markets.
The Glasgow-based firm, which was spun out of a management buy- out from Scottish Enterprise three years ago, said it had completed investments in 14 emerging technology firms – 10 of which are in Scotland – in the year to June.
Calum Paterson, SEP’s managing director, said: “We’ve taken the view that it is possible to take advantage of the hostile markets.
“The sharp fall in investment in early-stage companies in the venture capital market in general has meant that we are able to pick and choose the very best emerging companies to invest in and, at the same time, gain market share.”
Paterson said the downturn had appeared to be bottoming out at the end of last year, but the build-up to the Iraq war and the global economic uncertainty that accompanied it had a direct bearing on the buoyancy of the VC market.
“Even allowing for the highly cyclical nature of the VC sector, investment conditions have been extremely turbulent in the last 24 months,” he said.
SEP invested a total of (pounds) 11m last year, compared with (pounds) 12.5m the previous year.
“Deal flow during the first half of 2003 was certainly less than we expected, but our current pipeline suggests the second half will be much more active in Scotland and the UK in general,” Paterson said.
Over the past year, SEP’s investments have included leading a (pounds) 4.7m third-round deal for MicroEmissive Displays, an Edinburgh and Napier universities spin-out which hit the headlines when it built the world’s smallest television screen, and (pounds) 1m in second-round funding for Glasgow-based video compression technology firm Essential Viewing.
SEP has also expanded south of the border with a London office, major investment in wireless technology firm Cambridge Silicon Radio and in biotech company Intercytex.
Paterson said: “Eventually, more of our investment will be south of the border, although the Scottish market will remain a significant focus for us.”
