Cheeky online retailers over the moon at Christmas

This Monday was due to be the busiest day for online shopping in 2007. Although many shoppers will undoubtedly flock to well-known online brands like Amazon and eBay for their Christmas presents, a good number will try out new sites offering unique products and services not available on the high street, as well as visiting those that offer high street products at lower prices.

Some of the companies hoping to share in the festive cheer have received venture backing from Europe’s top venture capitalists. As this year’s UK Venture Backed Report recently demonstrated, the Services and Retail sector represents an increasingly important share of the venture capital market as a whole, with that growth largely attributable to the rise in online retail. Some of the companies currently riding the wave of increasing online consumerism are detailed below.

Moonpig, a London based printing company, allows users to purchase personalised greeting cards and operates solely online. The company has increased its revenues by almost 400 per cent since 2003 and hit profitability in 2005.

Firebox is an online retailer that sells a range of gadgets and lifestyle products aimed at men in the 18-34 age group. The company was founded by Thomas Boardman and Michael Smith, who also founded Mind Candy, the online casual games company that recently presented at Library House’s Essential Mediatech event. Firebox is a dot-com survivor, having received funding from Spark Ventures back in 1999 and living through the crash a few years later.

For those that prefer their gifts to be a little more racy, this month Poole-based BeCheeky received a £630k round of funding from South West Ventures and a consortium of business angels. The company specialises in selling hard-to-find and carefully selected mainstream lingerie and is poised for major growth with an exit via a planned IPO on AIM in spring 2009.

Even the favourite present of Grandparents everywhere, the gift voucher, can now be purchased online. Irish company The Gift Voucher Shop partners with national retailers in Ireland, Malta and the UK to provide a central point for customers to buy gift vouchers for over 600 shops nationwide. Through established partnerships, vouchers can be purchased at post offices throughout the UK and Ireland as well as directly online. In Q3 2006, the company raised €16m from a consortium of investors including ACT Venture Capital.

Historically, a major problem with building an online retail company was a lack of consumer confidence. Although these fears have been reduced in recent years, the problem still remains today. Established online brands like Amazon and brick-and-mortar companies with a web presence like HMV have less trouble convincing users that they are genuine but less well-known retail start-ups operating solely online have to deal with this problem.

Customers are more likely to trust online retailers located in their own country and companies have used this fact to address the problem of gaining consumer confidence. Previous Library House newsletter editorials have dealt with the phenomenon of ‘me-too’ technology companies in Europe, essentially European-language clones of successful US companies, and the online retail sector is no different. For example, Chapitre is a French online bookseller that received over €7m of investment at the turn of the century, became profitable in 2004 and turned over almost €10m in 2005.

The current web boom is fuelling more start-ups in the online retail sector and entrepreneurs and investors are clearly hoping they end up building the next Amazon rather than the next boo.com.

The Week's Deals

Fovea, the France-based biopharmaceutical company, this week raised €30m in series B funding led by new investor Forbion and including existing investors Abingworth, Crédit Agricole, GIMV, Sofinnova Partners and Wellcome Trust.  The funding will be used to advance the company’s clinical pipeline and develop its technology.  Fovea develops products to treat occular diseases, including retinal degeneration and glaucoma.

SensorDynamics, the Austria-based fabless semiconductor company, has raised €25m in series B funding from DEWB, FIDURA Capital Consult, Global Equity Partners, IPO Beteiligungs-Management, PONTIS and Siemens Venture Capital.  The investment will be used to further market penetration and sales of the company’s micro and wireless sensor solutions for automotive and industry applications.

OptimalTest, the Israel-based software provider, has raised $12m (€8.3m) from existing investors Pitango and Carmel in a series B round led by new investor Evergreen Venture Partners.  The company has developed a test management software to synchronise and regulate the production of semiconductor wafers in real-time or off-line. 

More companies' intelligence at www.libraryhouse.net

The Week's Exits

Merrion BioPharma, the US- and Ireland-based specialty pharmaceutical company, has completed its IPO on the Irish Stock Exchange, raising €5.6m with a market cap of €67m.  Merrion will use the net proceeds to fund clinical trials and further development on its key product candidates.  The company is developing oral drug delivery technologies with the aim of increasing absorption across the intestinal barrier.

Trafficlink, the UK-based aggregator of traffic and travel information, has been acquired by ITIS Holdings for £16.5m (€23m).  ITIS will pay £10.5m (€14.7m) upfront and the remaining £6m (€8.4m), which is dependent on the company meeting performance targets, is to be provided by June 2009.  Trafficlink aggregates data from sources such as police control rooms and CCTV to provide real-time traffic and travel information to organisations such as the BBC, UK commercial radio stations, the AA and Teletext.

YooMedia acquired 95.2 per cent of Fresh Interactive Technologies, the Spain-based interactive television company, for £12.9m (€18m).  Fresh offers a variety of interactive services using computers, mobile handsets or any interactive digital television platform for single and multiplayer games, innovative advertising formats, people metering, program guides and turn-key projects.

More companies' intelligence at www.libraryhouse.net

People Moves

Xeround, the Israel-based provider of data-management systems has appointed Charlotte Yarkoni as chief executive.  Founder and former-chief executive Dr Gilad Zlotkin has taken on the role of chief technology officer.  Ms Yarkoni has previously served as president of the customer business unit at Amdocs.  Xeround has developed a real-time data convergence system for telecommunications companies.

Cambridge Broadband Networks, the UK-based wireless service provider of a radio transmission system that reduces backhaul, this week informed Library House that its former chief operating officer Graham Peel has been appointed as chief executive.  Mr Peel joined Cambridge Broadband Networks in 2006 and was previously chief executive of Keronite and before that chief operating officer of Group Lotus.

Heartscape Technologies, the US- and UK-based medical device manufacturer, this week appointed Barry Wilson as chairman and independent director.  Mr Wilson recently retired from his roles as senior vice president of Medtronic and president of Medtronic International.  Heartscape has developed PRIME ECG, a device that allows accurate and rapid diagnosis of heart attacks and ischemia in emergency cases.

More companies' intelligence at www.libraryhouse.net

Selected Recent Updates

Sweden-based Nanofactory Instruments develops and produces novel electron microscopy-based tools for nano-scale manipulation.  This week, chief executive Mikael von Dorrien informed Library House that the company had achieved revenues of €1.6m in 2007 and expects this to grow to between €2.7m and €3.2m in 2008.  The recent investment from Industrifonden and business angels was used to establish offices in the US and Japan.  Mr von Dorrien revealed that the company may seek investment in the future to acquire other companies or intellectual property.

Kiala is a Belgium-based service provider with a network of collection points in local stores for customers to pick up, pay for and return parcels.  The company has offices in France and The Netherlands and intends to use a recent €26m investment to expand into the UK, Spain, Austria and Russia.  This week, Jean-Marie Arnould, Kiala’s chief financial officer, revealed to Library House that Scottish Equity Partners had provided €10m and ESO Capital €11m, the latter consisting of €8m debt financing and €3m equity.  Existing investors provided a total of €5m.  Mr Arnould also said that this would be the last investment into the company prior to an exit in mid-2009.  

Ecoil is a Sweden-based biofuel company that produces heating oil from rapeseed, which raised €530k from Industrifonden in July 2007.  This week, chief executive and co-founder Mikkel Selder informed Library House that the investment was used to build and staff a pilot plant which had proved the company’s concept.  Ecoil intends to open a funding round in Q1 2008 for £1m (€1.4m) to finance its product launch worldwide, initially in the US, Australia, Canada and India.  Mr Selder revealed that, following the recent investment, Industrifonden holds a 15 per cent stake in Ecoil, a total of 83 private investors have a combined 45 per cent stake and the remaining 40 per cent is held by himself and co-founder Bo Björkman.

More companies' intelligence at www.libraryhouse.net

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