Prelude Trust, the investment trust that specialises in early stage, technology-based businesses, managed by Esprit Capital Partners, has announced the establishment of a new joint fund with Cambridge Consultants.
Prelude and Cambridge Consultants will commit an initial £2.5m each to the fund, to be drawn-down over the life of the fund. The fund size will be of up to £10m.
The aim of the new fund is to invest exclusively in Cambridge Consultants’ own new ventures, following the company’s success in this arena. The first new venture is expected to appear in 2007. Candidates for the next batch of ventures are expected to come from a range of Cambridge Consultants’ core markets, including wireless technologies, drug delivery, diagnostics, radar and electronics.
The creation of the fund supports Cambridge Consultants’ move to restart its spin-out activities after a four year gap and will be used to invest exclusively in its own technology ventures. Four of Cambridge Consultants’ spin-outs have created value in excess of £1bn in the last seven years.
According to the British Venture Capital Association survey of 2004, the upper quartile performance of early stage funds between 1999 and 2004 returned a net IRR (internal rate of return) of 9.6%. During the same period Cambridge Consultants’ spin-out investments produced an IRR in excess of 50%. This performance led to extremely strong competition to partner with the company in the creation of the new venture fund, one that will see one new start up company created every two years on average.
Esprit won the tender process due to its strength in investing in, and supporting, early stage technology ventures, as well as its available funding for later stage growth.
Ray Edgson, Ventures Director at Cambridge Consultants commented: ‘To make a truly successful venture you need three key ingredients – the right people, the right technologies and the right market conditions.
‘With confidence now restored in the global technology markets, we believe that it is people that make the essential difference between the average and the truly great new ventures. Our track record of success in this area, and an IRR in excess of 50%, shows that our unique culture allows us to develop just such people.’