BUSINESS FINANCE & BANKING
Crescent’s third VC fund ready to fly William McCulla, Invest NI and Colin Walsh, Crescent Capital
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t has been a long time coming but the team at venture capital fund manager Crescent Capital are confident its third fund will be worth the wait. Crescent last year fell short of raising private funding that would have allowed it to reach the £22.5m closing level set by Invest NI in the previous iteration of the Development Fund. But after successfully re-tendering for one of the new £30m funds – which had a lower first close level of £15m, requiring a minimum £7.5m of private investment – Crescent III is all set to start investing, says CEO Colin Walsh. “This time last summer we were hammering the nails into the last attempt to raise the fund. It was awful because we could see half the money in front of our faces but the other half was impossible to raise under the terms we had. So we all moved on,” he said. “The market was tough. It was hard to sell. The terms of the previous fund weren’t any way close to as commercial and attractive as these
ones are. They probably weren’t too wide of the mark at the time the concept was framed but through the passage of time the goalposts moved.” Focusing on companies who need investment in the range between £500,000 and £2m, Walsh says the work it has put into preparing companies for investment over the past few years won’t go to waste. “There were some very compelling propositions that we groomed in preparation for Fund 3 that we have steered to other places to get funding in the end because we couldn’t hold them. But there are others that are still there,” he said. “There are a lot of companies who’ve been stuck because of the lack of available finance but also because there wasn’t the level of confidence to push on and develop their business. We’ve heard from the banks that they are trying to lend. You take some of that with a pinch of salt, but there has clearly been a reticence on
“There’s more of a chance of having more Andors in the next five years than there was of having one when they started.” 54 OCTOBER 2013
the part of a lot of companies to gear up. A lot of companies were looking to gear down so expansions were put on hold. But I think this has all come together at a good time because there’s been a palpable change in confidence in the last three or four months,” he added. “That hasn’t yet fed through to orders and growth in business for a lot of people, but they are getting more inquiries, giving more quotes, so their confidence goes up and they decide it might be time to dust off the expansion plans.” While Crescent has become synonymous with successful technology companies such as Andor Technology, Lagan Technologies and APT, Walsh expects to make more investments in firms which operate in more traditional sectors this time around. “Our focus is the same but our deal flow might end up different. We are generalist investors, although we are perceived as early stage technology investors. But that only came about because through the life of Fund 2 that was the deal flow that presented. We were after a flow of mainstream and industrial opportunities but the banking environment was such that they squeezed out equity providers at that time, so the types of deals we’d done in Fund 1 – for example Balcas – weren’t available to us. That’s the reason we ended up with a portfolio tilted toward technology,” said Walsh. “The landscape has now changed again. The banks have retreated so we anticipate there will be more of the mainstream type deals available to us, evidenced by the type of deal flow they are seeing at the Growth Loan Fund.” Having been in the game for 20 years, Crescent is confident its team is well placed to help company founders build better businesses and achieve successful exits. “There’s more of a chance of having more Andors in the next five years than there was of having one when they started,” said Walsh. “The whole ecology has changed. Now there is a whole galaxy of people offering entrepreneurship and business readiness training. Entrepreneurs are a lot more savvy, they are much more commercial and have much more rounded teams. The last four or five years there was no opportunity to IPO a small emerging technology company, but that’s turning now as well.” It is also possible that the run of no VC deals above £500,000 in Northern Ireland could come to an end in 2013. “There are a few deals in the funnel and we are working to get one or two over the line before Christmas. There are do-able deals we could finish before Christmas if there were no major obstacles,” he said. “We haven’t agreed final terms, we haven’t finished due diligence, but there is potential to do business in this calendar year and we are up for it.”