Finance Wales is close to three exits on companies backed by its technology-focused fund, including one via flotation.
Director of Technology Venture investments Steve Smith said the £40m fund, which has backed around 40 mainly pre-revenue technology firms in Wales, was also working towards making its first co-investment(s) with the Welsh Government’s £100m Wales Life Sciences Investment Fund.
The technology fund has around £5m left to invest, although it could apply for additional cash from general Finance Wales funds.
Its investment activities have also brought 12 high-growth potential businesses such as Seren Photonics from Sheffield, into Wales.
Mr Smith, said: “We have invested £12m in companies coming into Wales, but on the back of this we have seen a further £13m of co-investments. Co-investment is critical to the work of these companies as many will need a number of investment rounds to get through regulatory hurdles.”
To date, the fund has seen one exit, with a financially ‘facing washing’ deal as a result of the acquisition of marine technology firm GeoVS.
Mr Smith said: “We are not looking at exits much before seven years, particularly with university spin-outs.”
However, he confirmed that three undisclosed businesses in the portfolio could soon provide profitable exits for Finance Wales, which is a wholly-owned by the Welsh Government
He added: “There are two companies currently looking at terms for significant trade acquisitions, which would provide at least three times our money [investments from Finance Wales].
“There is also a possible flotation on the Alternative Investment Market with one company. The potential deals show that across our portfolio companies are gaining commercial traction ahead of plan.”
Mr Smith said the fund was keen to co-invest along the £100m Wales Life Sciences Investment Fund, which is managed on a discretionary basis by Arhurian Life Sciences.
To date the fund, of which £50m has been provided by the Welsh Government – and for which the remainder Arthurian will next month launch a match-funding finance raising round, has invested £20m. The four deals have leveraged significant co-investment levels.
Mr Smith said: “We are meeting with Brenig Preest of Arthurian regularly and they are keen to do business with us. We are looking at a number of deals with them at the moment which is encouraging.”
His innovation team is also overseeing the Welsh Government’s £7.5m Wales Technology Seed Fund, which will support technology start-ups, university spin-outs and IP rich companies in bringing new products and technologies to market. It is offering equity investments of between £50,000 to £150,000.
Mr Smith said: “We hope to see the first investments from the seed fund by the end of the month. We anticipate executing around 50 deals over the next five years.
“Obviously with many being pre-revenue there will be failures, but over the next five years we hope that around five to six of the companies supported will become serious technology business that will grow in Wales.”
Finance Wales is currently looking towards a successor fund to its £150m Jeremie Fund from 2015 onwards. Mr Smith said it was too early to say what level of finance would go into a successor to the existing technology fund.
However, he added: “The expectation is that the next model for Technology Venture Investments will be bigger than under Jeremie.”
Mr Smith said he and his team were also working on creating more opportunities for angel investors to co-invest alongside Finance Wales in high growth potential technology firms.
