Advent Closes UK’s Largest Tech Fund on GBP100 Million

Veteran UK venture capital house Advent Limited in March announced the final closing of Advent Private Equity Fund II (APEF II) at its GBP100 million (euro 151 million) maximum subscription level, albeit some months behind schedule.

APEF II ranks as the largest technology-focused pure venture fund raised to date in the UK and its LP line-up provides further welcome evidence of increasing demand among North American investors for exposure to UK and Continental technology investment. US investors contributed around 31% of APEF’s total and Canadian groups provided a further 11%, together matching the 42% contribution of UK investors. Continental European institutions accounted for all but 1% of the balance.

When it launched APEF II, Advent was in the unusual position for an established venture firm of having relatively few existing investors on which to call. Its previous GBP37 million LP fund, raised in the late 1980s, featured the Advent International network fund as a core investor alongside two major corporates. Advent International no longer channels cash into affiliate vehicles, and many participants in Advent’s early funds are no longer in the market. However, the lack of a raft of repeat customers proved no handicap, because Advent’s upper-quartile track record in recent years was sufficient to attract enough interest from first-time investors to take the fund GBP25 million over its original target. A GBP7.5 million commitment from the European Investment Fund, which boosted the vehicle past its first closing target, heightened its profile and attracted additional investor interest.

In all, Advent, assisted by placement agent Susan Lloyd & Associates, signed up 35 institutional and private investors for APEF II, adding 23 following the GBP45 million first close in May 1998. The fund-raising effort was delayed during the second half of last year as a result of international market turbulence, which slowed may investors’ decision-making processes but ultimately had no adverse impact on the fund.

The fund will focus on Advent’s three principal areas of expertise – the information technology, life sciences and communications sectors – and will address deals in the GBP2 million to

GBP7 million range. Advent invests in opportunities below this size range through its 1996- and 1998-vintage venture capital trusts. While the new fund is targeted primarily at the UK, Advent anticipates that as much as 25% of APEF II will be deployed in Continental Europe and the US. Finance director Martin Williams said US investments are likely to constitute a minority of the fund’s portfolio outside the UK and explained that APEF II will invest in US companies “only where Advent’s being in Europe can add value”. He offered drug discovery companies seeking links with the European pharmaceutical industry as a typical example.

By the time of APEF II’s first close, Advent had developed a strong pipeline of investment opportunities, and the fund has already deployed GBP19.2 million in seven companies – one each in France and the US and five in the UK.

The non-UK investments were in ASK SA, a French company that specialises in contactless smartcards and related software components for ticketing systems, and Argonex Holdings Inc. of the US, a biopharmaceutical company with unique expertise in the identification of antigens that trigger immune responses against diseased cells. The UK companies in the current portfolio are: CITEL Technologies, a PC telephone software specialist; KuDOS, which is developing drugs based on targets involved in DNA repair mechanisms; Phoqus, a drug delivery technology specialist; Post Impressions (Systems), a developer and marketer of digital products for the video, film, post-production and broadcast industries; and Scipher plc, an electronics intellectual property business formed three years ago through the MBO of EMI Group’s central research laboratories.