Gaule: Can you give us a brief description of your fund – when it was formed, size, funds deployed and business focus areas?
Smits: I joined Prime Technology Ventures in January 2009. Prime is a leading venture capital firm focusing on investing in European companies in the technology and related industries, and leverages its capital, experience and network to actively guide them into global category leaders.
The firm has invested in companies in the Benelux countries, the UK, France, Finland and Sweden. From its offices in the Netherlands and the UK, the independent partnership manages over €275m ($380m) in committed capital. Prime’s focus is on technology-driven companies in rapidly growing emerging markets within the information and communication technology industry.
The investments are in companies ranging in their lifecycle from seed to growthstage financing rounds. Typical investments are €500,000 to €5m initially, and we expect to invest €2m to €15m over all financing rounds. Ownership is usually in the 10% to 40% range depending on maturity of the company at the time of initial investment.
Prime often acts as the lead investor and is able to arrange significant additional funding through partners and investors. In October 2008 Philips Corporate Technologies and Prime Technology Ventures announced the completion of a successful spin-out of five technology ventures from Philips’s incubator venturing programme.
Gaule: What has been your most interesting recent deal?
Smits: On June 1, 2009, a company named Ipdia was formed in Caen, France. Ipdia is based on advanced 3D technologies in silicon, developed over the course of more than 10 years by NXP and Philips. It was not only the first investment led by me on behalf of Prime, but also Prime’s first investment in France.
Thus, with the support of Prime and a number of French investors, the Ipdia team created a company to apply these proprietary technologies in integrated devices for high-brightness LEDs [light-emitting diodes] and integrated passive devices for the medical, industrial, aerospace and defence markets.
Ipdia’s technological lead in components for lighting, LEDs and integrated passive devices will enable the company to capitalise on this knowhow acquired over the last few years and which earned Ipdia its position as a major player on the world market.
Gaule: What is your current view of the venture capital markets and opportunities for investments and exits?
Smits: The traditional VC markets – the US and, to a lesser extent, Europe and Israel – are under pressure due to disappointing performance in the past 10 years following the bubble.
This will lead to a situation in which only the fittest will survive, and for those surviving the opportunities to invest will be good. New technologies will keep on arising since it is the only way to realise growth and to develop. As a result, an exit market will be there, as it always has been, at least in trade sales, whereas the ability to bring companies to the public markets will depend on general sentiment and regulations.
Gaule: What have you seen as the most challenging issues when managing the relationship with strategic investors?
Smits: Prime values relations with strategic investors and always has found mutually satisfactory solutions in situations where the interests of financial investors and strategic investors are not parallel.
Areas where careful balancing of interests need attention are financial returns versus strategic returns, independence of the company relative to the strategic investor and avoiding conflicts of interest between the strategic party as investor and the strategic party’s business.
Often Prime can invest with a longer time horizon than strategic investors that need to meet strict financial and operational targets every quarter, which has led to an appreciable number of corporate spin-outs in our present, third fund.
To contact Andrew Gaule and for future interview ideas email andrew.gaule@h-i.com and jmawson@globalcorporateventuring.com