Brook partner Ned Williams represents US VCs at UK Competitiveness Forum.
Boston MA – Brook Partner, Ned Williams, recently spoke on investing in underserved regional markets at Cambridge University for the Cambridge University-MIT Institute Competitiveness Forum. The goal of this event, which attracted a full capacity international audience, was to increase the understanding of the role that venture capital plays in regional development worldwide.
Speakers from both sides of the Atlantic came to share their views and experiences with an audience drawn from US and UK regional development agencies, venture capital funds, universities, business incubators and financial service firms. The speakers offered an analysis of the challenges small businesses face in attracting venture financing and provided insights into the impact that initiatives to foster venture capital in underserved markets are having in the UK and US. They also discussed the so called “capital gap” in which growing companies have a difficult time raising smaller investment rounds of less than USD $5 million.
Michael Kitson, Director of the National Competitiveness Network at the Cambridge University- MIT Institute, discussed his research into the capital gap that exists for young high-tech firms in the UK, and which is notably acute for biotechnology firms. “Drug discovery is long-term and expensive,” he stated, so these firms are seeking venture financing – but funding for these firms can be extremely volatile, particularly when public equity markets fall and it is difficult for those VC firms [which are dependent on the public market] to find an exit.” The speakers noted that venture investors providing smaller rounds of financing, and who are not dependent on a public offering, can enjoy favourable valuations and attractive returns while supporting a company which might otherwise find it difficult to obtain financing from larger funds seeking to exit through the public markets.
His Cambridge colleague, Economic Professor Ron Martin, presented research findings on another aspect of the funding gap for small firms – the fact that venture capital supply is overwhelmingly concentrated in urban & developed regions, making it hard for firms in other regions to access venture capital finance. He contrasted this situation, which is prevalent in both the UK and US, with that of Germany, where regional stock exchanges and local finance communities are maintained, therefore “[providing] a more even regional distribution of investment”.
A US perspective was provided by Ned Williams, General Partner at Brook Venture of Boston which invests in expansion-stage IT and medical technology firms. Mr. Williams spoke with delegates about Brook’s success operating in regional markets: “We deliberately seek out businesses in underserved regional markets, thereby rarely competing with other venture firms when working in these areas.” These markets, according to Williams, are also underserved in capital terms: “there are few funds investing in the $1 – $5 million range; we aim to fill this ‘capital gap’ by providing financing between the $1 million or less level typically offered by individual investors and the $5 million or greater minimum amount typically offered by large investment firms.” Williams also commented on the benefits of this approach for existing shareholders of these businesses: “Often, companies are better served taking less new capital rather than the larger amounts thrust on them by many venture funds, even if the valuation of their company is lower at the time of the transaction. This typically results in a company receiving the funds it needs to grow without the substantial dilution that a larger investment round would entail”.
About Cambridge-MIT Institute
The Cambridge-MIT Institute (www.cambridge-mit.org) is a pioneering partnership between two world-class institutions: the University of Cambridge in the UK and the Massachusetts Institute of Technology in the US. Established in July 2000, it receives funding from the UK government and industry partners to carry out education and research to enhance the competitiveness, productivity and entrepreneurship of the UK economy
About Brook Venture Partners
Brook Venture Partners provides expansion stage venture capital to information technology and medical technology companies based in the Northeastern United States. Brook is headquartered outside Boston in Wakefield, Massachusetts and has an office in Albany, NY. For more information, call 781-295-4000 or visit www.brookventure.com.