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Band of brothers required for CGT battle

The US and UK venture capital industries face remarkably similar predicaments at the moment. In the US, the powerful chairman of the House Ways and Means Committee, Charles Rangel, last month proposed a broad overhaul of the nation's tax system. Mr Rangel's bill would more than double the tax rate for carried interest. Venture capitalists' profits are currently taxed at the capital gains rate of 15 per cent. But that rate would increase to 35 per cent if Mr Rangel's bill became law.

In the UK, following last month’s pre-Budget Report, capital gains tax is due to rise from 10 per cent to 18 per cent in April. This would have a substantial impact on both returns from VC funds and on entrepreneurs wishing to sell their businesses.

The US and UK situations are also similar in that there is, effectively, a brief consultation period during which the respective industries have been offered the chance to plead their cases. But here is where the similarities end. Although industry participants on both sides of the pond recognise the substantial harm that these tax moves could inflict on them, the responses have differed widely.

In the US, the National Venture Capital Association has reacted with speed and power. Last week, it sent a letter to the US Congress, warning that the government risked killing the goose that laid the golden eggs. The letter was signed by more than 500 entrepreneurs from nearly 40 US states, many of them representing high-profile companies. The NVCA appears to have approached the problem in a smart way: it avoided the perception of representing rich investors who are upset at the prospect of enriching themselves more slowly in the future. Instead, it enlisted grass-roots support, the very companies that drive growth and provide future US tax revenues.

In the UK, by contrast, a united and broad-based front is conspicuous by its absence. In fact, the reaction has been so supine that the industry has had to be told how to make its case. Lord Sainsbury, a major Labour donor and adviser, and former minister, told a conference of VCs last week that they must make their argument more intelligently. He said: “If you focus your argument on the entrepreneur end of things, there might be scope for getting a change back to a lower tax rate for people investing at the early stage of businesses.”

The UK government has already indicated it would be willing to listen to reasoned argument from the VC community so there is surely no need for a further call to arms. The industry really needs to band together and complain loud and long if it wants to stop this tax change in its tracks.

The Week's Deals

Syntaxin, the UK-based biotechnology company, has raised £16m (€22.9m) in series B funding from Abingworth Management, Johnson & Johnson Development Corporation, Life Sciences Partners, Quest for Growth and SR One. Syntaxin is focused on the discovery and development of new medicines derived from bacterial toxins, for the treatment of chronic diseases. Set up in 2005 as a spin out from the UK Health Protection Agency, the company is now based in Oxford.

Another Oxford-based biotechnology company also announcing a round involving US investors last week was Oxford Immunotec. It completed the first stage of a $40m (€27.6m) series E funding round led by Clarus Ventures and Wellington Partners and including DFJ Esprit. The company is developing novel products based on its patented T-SPOT technology, designed to provide new ways to diagnose and monitor infection and disease by examining a patient’s cellular immune response.

Atraverda, the UK-based material company that owns the intellectual property (IP) rights to a conductive ceramic known as Ebonex, has raised £10.4m (€14.9m) in series B funding from BankInvest Group, EnerTech Capital, Espírito Santo Ventures, Finance Wales Investments, OnPoint Technologies, Sagentia and Scottish Equity Partners. The Ebonex material has a range of commercial applications in the power storage, water treatment and construction markets. Atraverda’s current focus is on the multi-billion dollar power storage market where its technology is utilised in the production of batteries that are designed to be smaller, lighter and more reliable than those currently available.

Skinkers, the UK-based information broadcast technology company, has raised $16m (€11.1m) in second round funding from Acacia Capital Partners, Spark Ventures and the company's management. Skinkers' products are designed to deliver priority information such as breaking news, corporate communications, service outages, share price alerts and podcasts. Skinkers will use the funding to further develop and enhance its Live Notification Platform technology and bring to market LiveStation, its live peer-to-peer television platform.

The Week's Exits

Kiadis, the Netherlands-based oncology-focused drug company, plans to raise new funds through an initial public offering on the Amsterdam Euronext in the coming months, according to investor Prelude Trust. The proceeds will primarily be used to to develop key blood cancer products. Kiadis is currently preparing the filing of a phase III study for one product and expects to have phase III clinical studies of three novel blood cancer products before the end of 2008.

Transchip, the Israel-based fabless non-memory chip designer, has been acquired by Samsung for an undisclosed amount. TransChip specialises in designing, developing and marketing image sensors, called CMOS sensors, used in digital cameras. TransChip will be turned into one of Samsung's research and development centres.

Silicon & Software Systems (S3), the Ireland-based licensor of mixed-signal circuits for consumer products, has acquired Portugal-based Acacia Semiconductor for an undisclosed amount. The acquisition of Acacia, a developer of data conversion IP, is designed to add higher speed, higher resolution and lower power data converters to S3's IP portfolio. Markets served by existing S3 clients include WiFi, WiMAX, mobile digital broadcasting, high-definition video applications and power-line communications.

People Moves

Plastic Logic, the UK-based developer of plastic electronics, has appointed Richard Archuleta as its new chief executive. Mr Archuleta takes over from John Mills, who had been acting chief executive as well as chief operating officer since the departure last year of co-founder and first chief executive, Stuart Evans. Archuleta brings more than 25 years experience in the technology industry at Hewlett-Packard, most recently as senior vice president. He has also led multiple businesses through significant business transformations, rapid growth and international expansion in the areas of mobile computing, servers and e-commerce.

Autoquake, the UK-based online remarketing seller, has appointed Garry Hobson as chief executive. He takes over from co-founder Jeanette Moskouits, who now assumes the role of head of strategy. Autoquake offers online deals to car buyers through eBay, AutoTrader and other classifieds. Cars are displayed in Autoquake's virtual showroom which offers an interactive view of the car, including an application that shows any dents and scratches. The company says it has pioneered the concept of accurately describing a used car online and is now the largest seller of used cars on eBay.

Most Accessed Companies

Kewego, the France-based online video platform provider, has attracted a lot of attention this week. Kewego has developed a platform for aggregating and broadcasting audio visual content for home and professional audiences. The company operates more than 100 video platforms for a range of clients such as TV broadcasters, newspaper and magazine publishers, and operators of websites. Clients include well-known brands such as Orange and Lycos. The company also operates its own branded video sharing sites.

[[Buildersite]], the UK-based online marketplace for homeowners and building companies to find trusted craftsmen, has also attracted a lot of attention. Buildersite collects all the details and background information on a tradesman or contracting company, combines it with what previous clients have said, and presents the builder profile to anyone who wants to look at it. The company recently won funding from the Seedcamp initiative and is currently in the process of raising a funding round of £500k - £2m that it aims to close by the end of the year.