There are two types of venture investing: shorter- and longer-term and as more companies start to lift their eyes above the tyranny of quarterly earnings their corporate venturing units will start to be more nuanced in how they invest between these time horizons.
One group that has already begun to structure itself to meet the different requirements for investing over 30 to 50 years as well as three to 10 years is mutual fund manager Fidelity and this week’s Big Deal analysis looks at its latest corporate venturing deal, backing UK-based power-switching technology company Amantys. This deal shows the maturity of the technology sector but also the relative fragility of the venture scene in much of Europe.
It is also a look at the second most important story in technology linked to Cambridge, UK, technology this week – with the allegations between software provider Autonomy’s accounting methods and Hewlett-Packard sending shock-waves through that community.
Amantys raised $8m in its series B round from existing shareholders Moonray Investors, which invests using Fidelity’s balance sheet to look for long-term investments in clean-tech and healthcare, and UK-listed chip maker Arm, which is interested in the portfolio company for its application to mobile phones.
Fidelity, meanwhile, is effectively two separate-but-affiliated companies, Fidelity Management & Research (FMR, or Fidelity Investments) for US operations and Fidelity Worldwide Investment (formerly Fidelity International, FIL) for non-American business, but both are run as private companies with a founding, controlling shareholder as the Johnson family.
Moonray provides the longer-term venture investments for Fidelity Worldwide, while Devonshire Investors (rebranded from Fidelity Capital in 2007 after the Boston street where its office is based) provides the same focus for FMR. Fidelity Worldwide also operates a number of corporate venturing units in Europe, India and and China, with more traditional time horizons of up to a decade holding periods. FMR’s similar operation, Fidelity Ventures, spun out two years ago to form Volition Capital, while its US buyout team at Fidelity Private Equity Partners was shuttered and Fidelity Biosciences remained in the company.
Amantys was Fidelity Worldwide’s first long-term investment in clean-tech, where the objective is to back a sector or theme that could take generations to play out. Moonray, which is looking for operating companies that will require reasonably large amounts of capital to work, such as wind farms and software and services in energy efficiency, originally joined Arm by investing $7m in Amantys in July 2011. Amantys provides devices to help switch power, for example in wind turbines to prevent them tripping during peak production, which complements Moonray’s other, subsequent clean-tech investments in a wind farm in Scotland and an investment in a private company providing software to manage the wind turbines.
And Moonray liked the deal so much it hired in July this year one of Amantys’s co-founders, Peter Magowan, as its head of energy and promptly reinvested in the portfolio company’s B round.
Magowan’s history according to business network LinkedIn shows how the European venture and technology scene has matured. After being one of the early employees at Arm – he joined two years after its launch in 1990 – and spending a decade at the chip maker he left to spend nearly 10 years at Alta Berkeley Venture Partners, which was effectively formed out of the European operations of US venture capital firm Burr Egan Deleage after it split up in 1996 but has a track record reaching back to 1982.
But while others of its European peers and syndicate partners during the 1980s and 1990s, such as Charterhouse and Apax, moved into leveraged buyouts and raised billions of dollars, Alta stayed focused on venture capital. Alta, however, has not publicly done a deal or raised a fund for years as investor sentiment for European venture capital has remained grim for much of the past decade, according to surveys of limited partners carried out by secondaries firm Coller Capital. There has been a steady decline of many European venture capital firms unable to tap corporate limited partners as peers, such as Emerald, Iris, Wellington, TVM, Index and Gilde, have done.
Alta’s most recent exit was selling UK-based Frontier Silicon to local fabless chip peer Toumaz in August for up to £32.3m ($50m). This price was about the same amount as Frontier had raised between its angel-led seed round of £2m, to the £3m provided by Apax and Alta in 2003 to the phone maker Nokia and hedge fund GLG’s £12.7m round in April 2004 and the final £16m in January 2007.
Amantys has this month hired Steve Evans to be its vice-president of marketing from Frontier Silicon and another ex-Arm employee.
The role of technology leaders, such as Arm, or the departure of executives resulting from such mergers as Frontier and Toumaz, in developing an ecosystem is invaluable to a society.
In much the way US-listed computer maker Hewlett-Packard trained so many managers and supported other start-ups after its rise, even those that could have been competitors.
It is perhaps ironic, therefore, that under a new generation of executives HP has thrown into doubt the gestation of a venture capital firm, Invoke Capital, set up by a raft of trained executives who left after the company bought UK-listed software provider Autonomy. These ex-Autonomy executives under chief executive Mike Lynch at Invoke had been looking to support technology start-ups often with university-derived intellectual property (see his interview with Global Corporate Venturing last month) but HP has alleged improper accounting at Autonomy before its purchase, which Lynch has rebutted.
Magowan and other former Arm executives and Patrick Palmer, an academic from Cambridge University formed Amantys in March 2010, a start-up which could have been exactly the type of company to have gained from Invoke’s launch but now reliant on two corporate venturing units prepared to invest over the longer-term.