LONDON-based venture capitalists IP Group hopes that over the next five years it will be able to help a North East company emulate the regional success of software giant Sage.
The IP Group is one of six fund managers selected to manage equity investments from the JEREMIE fund – now known as Finance for Business North East – designed to help North East businesses grow.
IP’s chief operating officer Magnus Goodlad said: "The North East has two excellent research-based universities in Newcastle University and Durham University which already provided a good deal flow for technology businesses.
"The region has produced some excellent technology-based businesses over recent years, such as Sage and IDS, and we will be looking for investments which can emulate that."
IP is one of six companies which has been chosen to manage the six funds which will invest the Finance for Business North East’s riches.
It is estimated that almost 850 SMEs could benefit over the next five years, creating or supporting 5,000 jobs. It is the only fund of its kind in England.
The funds are earmarked for businesses in different sectors or at different stages of development, although there is some overlap to encourage competition between the fund managers.
The £125m for the Finance for Business North East is made up from the European Investment Bank, £62.5m, the European Regional Development Fund 2007-2013 £44.25m and £18.25m from regional development agency One North East.
It opened for investment in January and so far hundreds of businesses have enquired about access to the funds with details on the first investment due within the next few weeks.
At the end of the funds’ profits from the investments will be recycled into a legacy fund to support future investments. Its arrival in the region has been welcomed by the North East corporate finance community.
Chris McCourt, corporate finance manager at BTG McInnes Corporate Finance in Newcastle. said: "The launch of the Finance for Business North East funds is great news for the regional economy, and the continued availability of equity and mezzanine investment in the North East will go some way to bridging the equity gap faced by many SMEs in the region.
"The structure of the individual funds has been determined with a deliberate overlap in investment objectives. This is aimed at stimulating competition between the individual funds, and indeed other potential funders, with the hope that this can deliver the best deals for SMEs.
"The funds are a great opportunity for SMEs based in the North East, and the legacy funds they are designed to generate should provide help to SMEs in the region well beyond the five-year investment life of these particular funds.
"The increased exposure to venture capital-type deals in the region will strengthen the experience of the SME community, which may in itself in time lead to some of the larger private equity houses taking a more active interest in North East companies."
Newcastle-based NEL Fund Managers believe its Growth Fund will help create over 1,500 new jobs in the region by the end of 2014, as well as helping to safeguard a further 1,300 jobs.
NEL says it plans making is aiming to make investments of between £50,000 and £400,000 in at least 130 established companies based anywhere in the North East which are at a development and growth stage.
Chief executive Barrie Hensby says: "The Growth Fund provides a fantastic opportunity for ambitious regional businesses to access the development capital they need to develop their services, expand their operations and create new, sustainable employment opportunities.
"The availability of investment capital is always crucial to both the short and long-term health of the regional economy, but it is especially so in the present difficult climate, and we are very keen to hear from established companies with strong management teams and robust business plans that we can help to develop and succeed."
Meanwhile the IP Group is in the process of opening its office in Newcastle having recruited two well-known figures in the North East business world Duncan Lowery and Nick Edgar, who both formerly worked for NEL.
Alan Aubrey, chief executive officer of IP Group, added: "We are in the process of establishing an office and team in Newcastle and look forward to working to deploy the fund in the region which we believe has exceptional investment potential."
:: Companies interested in accessing fund finance can register their details now at www.onenortheast.co.uk/financeforbusinessnortheast and they will be contacted by a fund manager or go to www.northeastfinance.org
THE Technology Fund, which will be managed by IP Group with funds of £25m. It will invest in hi-tech businesses at any stage of their development, typically investing between £50,000 and £1.25m. Businesses most likely to benefit from this fund are likely to be already well-established.
The Technology Proof of Concept Fund, which will be managed by Newcastle-based NorthStar Equity Investors with funds of £15m. It will look to invest in very early stage businesses in the technology sector and will work with North East universities, the region’s centres of excellence, start-ups and entrepreneurs. Typical investments will be between £20,000 and £100,000 with further investment possible as the company grows.
The Growth Plus Fund, which will be managed by Finance Wales Investments controlling funds of £20m. It will look to invest in more mature businesses which need a cash injection to make a step-change in their enterprises. The fund can complete investments of between £350,000 and £1.25m and could be used as infrastructure investments.
The Growth Fund will invest in more mature businesses looking for growth capital. It will be managed by Newcastle-based NEL Fund Mangers with funds of £20m. Typical investments will be between £50,000 and £400,000 and may come in the form of loans which are convertible into equity at a later date.
The Angel Match Fund, will be managed by Rivers Capital Partners – a joint venture between London-based E-Synergy Newcastle based Finance Tree - with funds of £7.5m.
It is aimed at smaller, entrepreneurial businesses in early stages of development and can partner with business angels to provide matched funding for later stage deals. Typical investments will be between £50,000 and £150,000 and are likely to be on a 50-50 basis with the angel investors likely to be the ones identifying the opportunities.
The Accelerator Fund, managed by NorthStar with funds of £20m, will invest in companies and pre-start enterprises in any sector. It is aimed at businesses who may have already had seed capital and need further growth capital, with investments of between £50,000 and £750,000 available.
Seminar to help businesses get access to funds
NEWCASTLE-based commercial law firm Muckle is bringing together a panel of fund managers and experts at an event designed to help regional businesses benefit from the new fund.
Muckle has organised the seminar to provide advice to firms looking to access the new £125m Finance for Business North East Fund, on Wednesday March 3, 2010, between 4pm – 7pm, at the Hilton Newcastle Gateshead.
Andrew Davison, partner at Muckle and panel chair at the event, said: "Muckle is dedicated to providing first rate support to businesses and we have organised this event to help the North East business community understand the nature of the funds and access advice on how they can benefit from this multi-million pound venture capital.
"Business growth is pivotal to leading the North East’s economic recovery and the Finance for Business North East Fund will help to generate this growth as over the next few years it is expected to support up to 850 small and medium- sized companies, with the aim of creating more than 5,000 jobs.
"We are proud to have attracted the region’s key business people and leading fund managers to this event, allowing businesses with the opportunity to directly access the best possible advice on how to tap into this financial support for growth."
Panel members will be Alasdair Greig, NorthStar; Jonathan Gold, Rivers Capital Partners; Barrie Hensby, NEL; Duncan Lowery IP Group; Peter Wright from FW Capital and Peter Robinson from Muckle.
Central government backing North approach
THE model used by One North East in developing the £125m fund is being recommended by the Government for adoption by the other regional development agencies.
ONE was advised on the creation of the fund by experts at the Newcastle offices of Eversheds law firm and accountants Deloitte.
Eversheds partner Ian Gilthorpe said: "The fact that central government has endorsed the North East approach, urging other regional development agencies to follow in the footsteps of One North East, demonstrates the quality and strength of our regional development agency.
"This project highlights the importance of collaboration at both a national and a local level and illustrates the benefits of having a strong regional development agency which develops and implements critical strategic initiatives which are tailored to the needs of the region."
John Spurr, director, Deloitte, added: "Ensuring SMEs have appropriate access to funding is absolutely critical for the development of the region.
"The business community is looking for a straightforward approach to access to finance. The launch of this fund will not only benefit the North East, it will also benefit other regions as central government is encouraging other regions to adopt a similar structure to that being used in the North East."
Malcolm Page, deputy chief executive, One North East, said: "The importance of the European Investment Bank’s willingness to invest in our new fund should not be underestimated. It is a commercial organisation and like any other commercial organisation is looking for a return on its investment. Its desire to invest in the region’s SMEs demonstrates the region’s potential for growth.
"I also want to praise the good working relationship we developed with Eversheds and Deloitte."