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High-tech emerges as a safe haven

Our more switched-on readers will have noticed that raising money these days is considerably more difficult than it was three months ago. Northern Rock has effectively collapsed through lack of funding and the private equity buyout market has ground to a halt as leveraged loans have become as rare as a General Partner without a yacht. And the world is now waiting to see whether the after-effects of the US-led crisis will poison the wider economy.

So where does that leave the venture capital sector? Clearly a slowdown in economic activity is harmful to all types of companies and would negatively impact portfolios. At the same time, valuations would subside, giving investors with firepower the chance to pick up assets more cheaply. 

But venture capital depends on exits and IPOs are a scarce commodity at the moment, even though absolute stock market levels are only marginally down. According to Thomson Financial, IPOs by US venture houses fell from 11 in May and nine in June, to six in July and five in August.  There will also have been an impact on the mergers and acquisitions landscape.
 
To some extent, this will have been offset by the strength in depth of corporate buyers. In the US, IBM, Microsoft and Cisco Systems are less likely to be deterred from considering acquisitions because they tend to have large stores of cash. However, even for the powerful corporates, market conditions could take some of the premium out of any deal.

Overall, the mood is sanguine. Many in the industry believe venture capital has little to fear from the rollercoaster ride in the public markets, and might even benefit from them.  Technology stocks, which have lagged the general market over the last few years, have outperformed most other industry sectors during the recent months of volatility.

The IPO of UK-based Craneware, a software company that listed last week, is a case in point. The company achieved the highest point in its price range and allowed the venture capital backers - 3i, Scottish Equity Partnership and Life (Lothian Investment Fund for Enterprise) -  to divest their stakes. In the US, software company VMware sold 10 per cent of its shares in August in an offering that soared 76 per cent in its first day of trading, despite a 208-point drop in the Dow Jones Industrial Average that same day.

As Mark Heesen, president of the US National Venture Capital Association says: "Tech is looking pretty good now because of the problems in other sectors.” How times change.

The Week's Deals

GeoSentric, the Netherlands-based developer of geo-social networking technology, has raised $13.1m (€9.5m) from Horizon Group, Schroders and other undisclosed investors. Led by former senior executives from Netscape, Oracle and AOL/Time Warner, GeoSentric develops products that deliver geo-based consumer and business applications that integrate a mobile user’s desktop, digital television and personal navigation device. The company says its original target was to raise $5.5m in the current round of funding but investor interest compelled them to increase the size. The funding will be used to expand the company’s marketing and sales in selected global geographies and to develop its R&D plans.

BroadLight, the Israel-based maker of networking chips and software, has raised $12m (€8.7m) in series E funding from Benchmark Capital, Azure Capital Partners, Broadcom Communications, Cipio Partners, Delta Ventures, Israel Seed Partner, Motorola Ventures, STAR Ventures and Tellabs. BroadLight delivers end-to-end products for equipment vendors designing ITU-T compliant passive optical network systems.

Galten, the Israel-based developer of biodiesel fuels, has raised $10m (€7.3m) from Capital Partners and other undisclosed investors. Founded in late 2005, Galten is cultivating the Jatropha plant, a non-edible crop which is rich in oils and can be grown in poor soil, to produce large quantities of vegetable oil which can be refined into biodiesel. The company, which plans to begin cultivating the plant in Ghana, expects to begin fundraising again next year.

European Telemedicine Clinic, the Spain-based teleradiology company, has raised €7m from Kennet Venture Partners and other undisclosed investors. Teleradiology involves the transmission of digitised diagnostic images - such as X-rays, MRI scans and CT scans - to a remote location for interpretation by certified radiologists. The company says that as a result of an increased demand for diagnostic scans, hospitals are looking to teleradiology to provide access to sub-specialty diagnostic services, and to reduce patient waiting times.

The Week's Exits

Havok.com, the Ireland-based provider of interactive software and services for digital media creators in the games and movie industries, has been acquired by Intel for about €79.3m ($110m).  The company will be a wholly owned Intel subsidiary and continue to operate as an independent business. Havok’s products have been used to drive special effects in movies such as Poseidon, The Matrix, Troy, Kingdom of Heaven and Charlie and the Chocolate Factory. Intel says that Havok will become a key element of its visual computing and graphics efforts.

Atrica, the Israel-based provider of carrier ethernet products for metropolitan area networks, is in advanced negotiations to be acquired by Nokia Siemens Networks for $100m (€72m), according to Israeli news service Globes. Atrica has raised more than €160m in funding since it was set up in 2000.

Mobotix, the Germany-based developer of digital video surveillance systems, has scheduled its planned IPO for September 27th. Founded in 1999, the company plans to use the proceeds to fund development of new products and to expand its sales network.

People Moves

Trampoline Systems, the UK-based enterprise software developer, has appointed Adrian Jones as vice president of sales. Mr Jones joins from Oracle, where he served as the head of global sales in the Oracle Embedded Business Unit. His arrival follows the recent appointment of former Microsoft “visionary” Peter Biddle as vice president of development.

SYSGO, the Germany-based supplier of software products for safety and security applications, has appointed Michael Tiedemann, former international sales manager, as chief executive. Mr Tiedemann succeeds Knut Degen, former chief executive and co-founder, who remains a major shareholder in the company. The move is part of organisational changes SYSGO is carrying out as it implements a global expansion plan.

Elsewhere, Life Optics, the Austria-based developer and manufacturer of advanced head-mounted vision systems, has revealed that chief executive Hans-Jürgen Schmitz left the company in August and has been replaced by Maximilian Gessler.

Most Accessed Companies

CALTEC, the UK-based developer of technology for the oil and gas industry, has attracted a lot of attention this week. CALTEC designs, develops and supplies equipment designed to improve production from oil and gas wells. The company says its technology can significantly increase the volume of commercially extractable reserves from oil and gas fields and reduce the environmental impact of such production. CALTEC has previously designed and fabricated the world’s largest jet pump for BP, to boost gas production from two satellite fields of BP’s Inde platform in the North Sea. Backers of the company include Geneva Energy Ventures and 121SC.

Skinkers, the desktop alerts company, has also attracted a lot of visitors to its Library House profile this week. Skinkers has developed a 'push' notification technology that is designed to cut through increasingly cluttered communications channels such as websites, intranets, email, SMS and instant messaging. Messages are presented to recipients through branded windows and ticker-tapes that can contain text, images, surveys, video or other forms of media. The company is backed by [[New Media Spark]] and Microsoft.