Shifting Funding Gaps

The Paris-based firm has hired Iain Wilcock, former deputy managing director of Quester Capital and Investment Director at NESTA, a government-backed fund, to advise on UK healthcare investment opportunities. Wilcock has previously been involved in the financing of more than 40 companies.

Seventure has over €500 million under management, with €200 million to invest across its portfolio, which includes information and communication technologies. It is yet to make an investment in the UK, which represents one third of the VC market in Europe.

So why now?

“In that sense [the UK] has always been attractive: there is scale and quality,” says Wilcock, adding, “Now there are changes in the UK landscape to make it even more attractive.”

The fall in the value of Sterling against the Euro is one lure. And at the same time, there are rich pickings and cheap assets on offer, thanks to the efforts of the UK’s 50-plus small, earlier stage, partly publicly-funded VCs. In the past decade their seed funds have succeeded in smoothing the path from crude university spin-out to fully-formed company ready for formal VC funding.

Unfortunately, there are now few active venture capitalists in the UK with the clout and inclination to pull together and lead syndicates for Series A and B rounds. The UK’s leading firms like Advent Venture Partners and Abingworth Ventures have successfully moved up to become international investors. “These mature UK-based VCs are few in number, and they maybe do one or two deals a year with a UK focus,” said Wilcock. “We have lost the middle ground.”

The generous public funding for start-ups, intended by the government to promote the commercialization of academic research, has created lots of small companies that are years from being profitable and with nowhere to go for further funding. “The more you pump up part of the market, the more you need to think about where [these companies] go next,” Wilcock said.

VCs struck between watering holes

While this situation predates the credit crunch and subsequent recession, the state of the financial system is exacerbating the problem. “I’ve done some research and guesstimate that two thirds [of VC seed funds] are out of cash, or need to keep funds for their existing businesses,” said Wilcock.

To date 70 per cent of Seventure’s investments have been in French companies, with the remainder invested elsewhere in continental Europe. The firm will invest €3-5 million in syndicates of up to €20 million. Wilcock is looking for established companies that are roughly three years old, and that have received around £5 million to date. Seventure invests across medical and industrial biotechnology, nutraceuticals and medical technology.

One third of the biotechs listed on the Alternative Investment Market (AIM) in London are about to run out of money, and Wilcock has also spoken to brokers about the possibility of taking companies private. “AIM is not a priority, but there are some with mature technology that would have an advantage in delisting. We’ve left calling cards,” he said.

However, the greater focus is on companies that are ready for formal VC rounds. Wilcock has an inside edge in knowing likely candidates because he is also investment director at NESTA, a public seed investment fund, that puts money into six or seven companies a year.

Wilcock said four potential investments are at the medium to advanced stages of due diligence and he expects the first investment to be made by the middle of the year.