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Never micro-manage? Think again

Microfinance is suddenly on every investor’s lips. The idea of providing very small sums to tiny businesses in emerging markets was given short shrift just a few years ago. But pioneers such as CDC proved the model could work and now the mainstream investment community is racing to get involved.

Well-known investment firms that have entered the space include Sequoia, the California venture capital firm, which has ploughed $11.5m into SKS Microfinance in India. Legatum, the Dubai-based private capital group, invested $25m in a majority stake in Share, an Indian micro-finance group. Morgan Stanley and Switzerland-based Blue Orchard raised $108m through a securitised bond backed by repayments from micro-finance loans. Compartamos, Mexico's biggest private micro-finance bank, raised $467m by selling off about a third of its equity.

CDC is now so certain of its model that it has invested $30m in a microfinance hedge fund called Minlam Microfinance Offshore Fund. And the concept has entered the general consciousness to such a degree that the inaugural SME and Microfinance Conference took place in Karachi last week.

There is also evidence of interest from outside the investment spectrum. Oxfam, for one, is in the process of raising £10m from London-based donors to invest in microfinance projects.

And proof that an industry, rather than an altruistic fad, is developing is provided by IBM’s involvement. Big Blue has announced a collaborative project to help microfinance institutions by developing software that streamlines the lending process and reduces operational and technology costs.

The microfinance concept was given impetus last year when former US President Bill Clinton took the stage with Standard Chartered at the Clinton Global Initiative and established a $500m “financial inclusion” facility. The facility now has 37 microfinance institutions as customers in South Asia and Africa and about 1m people now have access to finance they would otherwise have been denied.

Interestingly, nearly 90 per cent of these borrowers were women. We know from surveys on entrepreneurialism in western countries that women business owners often have better track records than their male counterparts. For those that identify with those findings, microfinance could represent a profitable financial expression of that belief.

The Week's Deals

DisplayLink, the US and UK-based fabless semiconductor company, has raised $24m (€16.4m) in series C funding from Atlas Venture, Balderton Capital, DAG Ventures and DFJ Esprit. DisplayLink develops semiconductor and software products for network display applications, which are designed to enable seamless and high-quality connections between computers and displays using standard wired or wireless networking protocols. The funding will be used towards accelerating product development and revenue growth.

Biovex, the US and UK-based clinical-stage biotechnology company, has raised $13m (€8.9m) in the second closing of its series E funding round. The investment, which included venture debt funding, will be used to fund phase III clinical trials of its lead melanoma drug, as well as trials for its treatments for head and neck, and pancreatic cancers. The round is to be used to advance studies of its second program, a vaccine for genital herpes.

Arterial Remodelling Technologies (ART), the France-based medical device company, has raised €5.5m from Matignon Technologies and Societe Generale Asset Management. ART is developing bioresorbable peripheral and coronary polymer stents that promote the natural remodeling of an injured artery after angioplasty. The funding will be used to pursue CE Mark clearance for the company’s first product, a bioresorbable stent that dismantles in vivo over an optimised time period.

The Week's Exits

Clear2Pay, the Belgium-based technology provider of payment products for financial institutions has acquired Integri, the Belgium-based supplier of test tools and test services for payments, ticketing and mobile applications. Financial terms of the deal were not disclosed.

Oxford Medical Diagnostics, the UK-based developer of laser-based techniques for the analysis of gases, is to be acquired by AIM-listed Avacta Group for an initial payment of £3m (€4.3m). OMD has reached the final prototype stage of its laser-based analysis device and the first product, which can measure the moisture content in natural gas, is expected to reach the market in late 2008.

People Moves

Ocean Riser Systems, the Norway-based specialist in pressure management services for deep-water drilling and well operations, has appointed Mr Terje Gunnerød as chief executive. Former chief executive and company founder Børre Fossli will assume the role of chief technology officer. The company also announced further funding of €3.2m from Aker Capital, [[Statoil Innovation]] and Viking Venture.

Sidec, the Sweden-based biotechnology company, has appointed Dr Fritz Frickel as chairman. Dr Frickel has previously worked at Abbott Laboratories, BASF, Knoll and Alantos. Sidec has developed a technology, called Protein Tomography, that visualises cellular events in 3D, at the molecular level.

OptimaNumerics, the UK-based provider of high performance numerical software, has appointed Dr John M Parkinson as chairman of the board. Previously Dr Parkinson held senior management positions in both hardware and software companies, including Silicon Graphics, Netmap, Apollo and PRIME.

Selected Recent Updates

Mamiweb is a Germany-based special interest community providing parenting advice for mothers and young women. It recently raised an undisclosed amount of funding from private investor network BrainsToVentures (b-to-v). This week, Dr Gerhard Oellinger, chief executive and co-founder of the company, told Library House that the recent round was below €1m and now the company is in the process of opening a new round of investment, to be used for further technological development and marketing. b-to-v is expected to participate again, with the potential to increase its stake to more than 25 per cent. Dr Oellinger, who currently retains about 60 per cent of the business, says the round is also open to new investors. The company believes that its focused user group makes it attractive to advertisers, and anticipates profitability in February or March 2008.

Stirling Danmark is a Denmark-based manufacturer of biomass-fueled engines for power generation with zero CO2 impact. The company's last announced round of funding was in early 2006, and chief executive Lars Jagd informed Library House this week that the company is now looking to raise €5-10m in a new round of funding at the beginning of next year. The new capital will be for further product development and commercialisation. Mr Jagd expects a company exit within five years, with an IPO or trade sale considered equally likely at this stage.

Sweden-based Zebor Technology sells and promotes what it says is the world’s only 'green' operating system. The company describes it as the fastest, most cost-effective, most productive and most environmentally friendly scaleable application-platform for computer based products. The company received an SEK 1m (€109k) convertible loan in August 2007 from Sting Capital, which it used to fund proof of concept work and is now looking to raise SEK 30m (€3.25m) to take the products to market in the US, UK and France. Mr Berth-Olof Bergman (chief technology officer and founder) told Library House this week that the company plans to support its planned growth by hiring a further 20-30 staff members over the next two years in the fields of technical support, sales and marketing, in addition to expanding the management team.