Activity among the UK’s high-tech start-ups is flourishing, with interest from venture capitalists and other investors markedly on the increase. This is according to SETsquared, the high-tech support programme for very early stage ventures, which, in the last 18 months has helped 200 technology entrepreneurs to raise over £6m of initial funding. SETsquared is part of the enterprise partnership between the universities of Bath, Bristol, Southampton and Surrey which recently received an unprecedented £13 million from the Government’s Higher Education Innovation Fund (HEIF), the largest single award so far made.
“In the last three months we’ve seen a real increase in activity,” said Nick Smailes, director of SETsquared, himself from a VC and start-up background, “but it’s not just been about our ventures raising funds. Many have found it easier to win customers, enter licence agreements and sell consultancy work.”
Nick said that underpinning this improvement is the fact that SETsquared has successfully managed to bring together private sector commercial experience with the research strength of universities. “By providing this support to ventures at their earliest stage and ensuring that they are truly prepared to meet investors or first customers, their chances of success considerably increase,” he said. “These factors, combined with an awakening interest in the investor market, mean that the new ventures have a much better chance of meeting the tough demands of today’s start-up market.”
Testament to the quality of the support is evident amongst some of the current members - many of whom are experienced and seasoned professionals themselves. One such example is Simon Murdoch, ex-CEO of Amazon.co.uk. Simon is currently receiving support to help develop a language learning business called FriendsAbroad.com
Ventures helped by SETsquared include:
1. Optx – oncology software
Having won contracts worth £500,000, the start-up quickly went through a trade sale. Simon Currey, founder and now ex-director said: “Initially, I could feel that the climate was a lot more positive, but I also knew we had to get in the strongest possible position before we started to meet potential customers.
“There is a lot of interest in biosciences in the UK and Southern England is the premier location, so, being based across the South, SETsquared was geographically ideal. Also their human network is outstanding and was clearly key to our early success.”
Since the sale, Simon has returned to SETsquared to develop his latest venture, Velocient, a company that uses IT to deliver clinical oncology trials more quickly as medicine becomes more complex.
2. Izezi – digital power control for latest generation of chip technology
Izezi is putting the finishing touches to a £100,000 bridge funding round to enable it to complete its design and start making its specialist microchips. “We’ve recently returned from the US where we have been talking to potential first customers and their enthusiasm really gave us – and our investors – the confidence to take things to the next stage,” said Kevin Arthur of Izezi.
“There has been a noticeable upswing in confidence and demand in the semi-conductor market – particularly in the last few months. It’s a very important time for start-ups in the high-tech area – which makes it all the more important to ensure you have the right support. We have had professional guidance from SETsquared from the start and have particularly benefited from the quality of the network they have built around them – making contacts which would have taken ages for us to find on our own.”
3. Achyra: development of new method of mass spectrometry
The venture is currently raising £400,000 to enable it to move its
technology from laboratory proof-of-concept to an advanced market
prototype. Achyra came to SETsquared to help raise this funding, develop
the technology further and build the management team; it is about to
appoint an executive chairman who was introduced to them by SETsquared.
“We have received many positive expressions of interest which is very encouraging and makes us confident of being able to complete this round on plan,” said Brian Webb. “Not only is the technology extremely exciting, but with a market currently valued at £2 billion a year, we have a promising, high-growth product on our hands.
“We certainly weren’t in this position six months ago. Not only does the
centre provide us with the infrastructure and profile to run a proper
business, but we’ve had invaluable help in terms of our financial
situation, the introduction to a new chairman as well as many investment
sources.”
4. NicheGnat: holds European rights to WebInterpoint Web Conferencing
Seasoned start-up entrepreneur Damon Oldcorn returned from the Silicon Valley CA just over two years ago, looking for the right environment in the UK in which to develop his latest venture.
“I came to SETsquared as I knew our idea was strong, but wanted to make sure we were moving in the right direction from the start. The centres have enabled me to present a serious business front from the start and the informal network amongst my peers has been beyond value, providing encouragement and motivation – eminently more advantageous to working alone.”
Having received an initial £100,000 from the Small Firms Loan Guarantee scheme, Damon feels confident that the time is right to go after private investors for the further funds he needs. He also felt that, with the number of IPOs starting to rise, business angels in the short term will have more opportunities to exit from their investments – indicating a more willing market. “As far as I’m concerned, it’s now or never,” he said. “If as a new venture you are not strong enough to cut it this year, then it’s probably a sign that your proposition just isn’t strong enough in the first place.”
5. Argelcom - specialises in the area of cryptography and information security
Argelcom recently received £250,000 initial funding – the highest possible award - from SULIS, a source of finance to the academic communities of Bath, Bristol and Southampton Universities designed to fill the gap between research funding and commercial venture capital.
The team is currently focused on email encryption and the funding has allowed the technology to develop to the commercial-trial stage. Further funding is being sought to explore applications that will enable user-friendly control, authentication or protection of other digital numbers like National Insurance, car registration or passports.
“What started as a concept 18 months ago is now rapidly becoming a commercial reality,” said Andy Dancer of Argelcom. “VCs are now more willing to talk and the economic climate is improving for sales. However, where once investors gave money to a good team with a good idea, it’s now a fundamental requirement to present a robust commercial plan and, in some instances, demonstrate initial sales. That is why support in the early days of development is now so important.
“People say that ‘cash is king’ and never more so than in a business’s early days – so having the low-cost, serviced office space was immediately important, not least because it enabled us to present a professional image from the start. Through the network we met Patricia Hewitt which enabled us to discuss our thoughts on early-stage funding. This was something we valued enormously because – as all start-ups know – most of one’s time is spent searching for that initial investment.”