Business Weekly - Cambridge, UK

The fund adds to an already deep well of seed capital in Cambridge, which plays home to active business angel networks such as Cambridge Angels and Cambridge Capital Group; specialist funds such as Babraham BioConcepts, the Amadeus mobile seed fund and the University Challenge Fund; the host of funds managed by GEIF; the East of England’s regional venture capital fund managed by CREATE; as well as facilitators such as Library House and Cambridge Network, to name but a few.

In practice, this latest fund adds £20m to the city’s seed funding coffers, through 50/50 co-investment arrangements with Amadeus’ institutional funds. AASF has already made its first investment in XMOS, a Bristol-based fabless semiconductor company.

Amadeus said it will fund up to 10 UK technology companies with the potential to become the type of company to attract Series A financing from Amadeus’ main funds, which invest in Series A all the way through to later-stage technology businesses.

Amadeus said it has been working to close the gap in Europe in the £250k to £1m funding range since 2001, when it raised £3m through the Amadeus mobile seed fund to finance development to the Series A stage.

That fund’s two investments, Nujira and Enigmatec, have both gone on to raise substantial rounds from other venture investors, together with Amadeus’ main funds.

The growth of early stage investment in Cambridge reflects not only the strong pipeline of valuable technology it continues to produce and its base of serial entrepreneurs, but also reflects wider trends.

The most recent Dow Jones VentureOne and Ernst & Young European Venture Capital Report showed that Europe as a whole is increasingly focused on early-stage investing. Some 39 per cent of the deals completed through the first three quarters of 2006 were seed and first round deals, compared to 32 per cent last year.

In the third quarter alone, 43 per cent of the deals completed were seed and first-round deals, up from 35 per cent in the third quarter of 2005.

“So far this year, there have been more first-round deals (234) than either second (120) or later rounds (216), a sign that investors are starting anew and are more interested in financing a fresh crop of innovation in Europe particularly in areas like the internet focused information services segment, consumer and business services, communications and medical devices.

“Plus, the amount of capital they have directed to these initial financings has already surpassed the amount invested in the first three quarters of 2005 by 40 per cent.” said Steve Harmston, director of global research for VentureOne.

“But despite the positive early-stage activity, we are seeing somewhat of a shake-out in the European market this year, with the pool of active investors declining and thus resulting in overall fewer deals.”