$150 million crosses Atlantic for UK high tech firms

A new $150 million venture capital fund from the US is planning to invest in UK and Irish high tech companies.

The Cross Atlantic Technology Fund (XATF) was launched today, continuing the flow of cash from the US into the UK where venture capital investment, though growing, is still hard to come by for entrepreneurs.

The formation of the fund, said founder Don Caldwell, stemmed from his relationship with the Crucible Corporation in Dublin to provide seed capital to upcoming young companies. XATF has sealed that relationship by taking a 51 per cent majority stake in Crucible, giving them first refusal on any second round investments on Crucible's books.

In return, Crucible receives a pipeline of contacts into the lucrative North American market, one which is crucial for European to conquer if they are to be globally successful.

"I decided to set up this fund because I felt that there was a wonderful opportunity to do this here because there is plenty of VC in the US but there's not in Europe, most especially in Ireland," said Caldwell.

The climate here is right for investing, he said. "There is a growing technology business in an entrepreneurial atmosphere. Big businesses are going through what we did in the US 15 years ago, downsizing, rightsizing and some of the older fashioned ties that existed between employees and companies are being shaken and companies are thinking they now have to be more entrepreneurial to prosper. For VCs that's exactly the right kind of arrangement we look for."

So far XATF has raised about half of the $150 million it is looking for, with lead investor being the Pennsylvania State Teachers Retirement System. US pension funds are frequent investors in venture capital funds because of the high returns possible. Part of the fund will be invested in US companies as well, such as Gain Technology which provides an online market for foreign exchange.

As a technology fund it is targeting companies operating in the Internet and ecommerce space, as well as those in general IT, software, communications, systems integration and professional services making early and mid stage investments ranging in value from $2 million to $10 million.

"The UK is attracting funds [from the US] because we have got good technologies, bright people and good universities and we have got fantastic investment opportunities," said Robert Conway, Global Technology Industry Leader in Financial Advisory Services at Pricewaterhousecoopers.

"In Ireland a lot of the larger US technology companies have set up there and it does mean that people grow up in that culture and it's considered a good education. People are getting experience of working with the larger US companies and in time there will be people coming out of those and starting their own ventures," he added.

IDC Senior analyst Stephen Minton said that US venture capitalists are coming to Europe because there is a gap in the market.

"These US companies are more willing to invest in young companies than European VCs. US VCs are more willing to fund a genuine start-up from day one while European VCs invest for expansion," he said.

"Without the US providing competition from outside the situation would continue to stagnate. It's a culture thing that's not easy to turn round," he continued.

The fact that XATF has the contacts to help UK businesses penetrate the US market gives the fund added value, said Conway.

XATF's first two investments are in Brainspark, an incubator and seed investor in Internet and ecommerce companies, and Zeus Technology which makes high performance Web server software. A further five investment commitments have been made, said Caldwell.

See also:

US investment in Internet start-ups soars

US venture capital funding hit a record $12.98 billion in the third quarter of this year, with $5 billion or 38 per cent going to Internet related start-ups.  03 Nov 1999

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