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Survivor venture firms ready to invest

Investors are returning to the market (Serono)

High-tech oriented venture capital funds that target start-up companies are getting back to the business of investing.

After a number of quarters of much subdued investment activity, investors are a little more upbeat as information technology suppliers are starting to report a return to sales growth.

While other venture capital houses may still be occupied looking after existing portfolio companies, established venture capital investment firms, such as Apax Partners, Sofinnova, and Star Ventures, along with a number of younger investment firms in Europe, are keeping a steady pace of funding innovative firms.

Viewpoint Capital with offices in Frankfurt and Zurich, Northzone Ventures with offices across Scandinavia, and the Zug-based Invision are some of the investors that have confirmed to Swiss Venture Update that they will be investing again this year.

In fact, they say, this is a great time to be investing. The bottom of technology cycles are great times to pick up equity bargains as valuations are at a low point. According to the industry experts, this provides lots of room for positive returns for investors when the markets start to pick up again.

Innovation the driving force

Innovation is "still the driving force" for new investments in the technology sector, according to Invision. Its Mach HiTEch fund is looking for new deals this year, in particular data security, data recovery and computer forensic firms, as well as process optimisation with a focus to cost-cutting, supply chain management and logistics optimisation, and data networking technologies for voice transmission.

The fund targets public and privately owned firms in Germany, Switzerland, and Scandinavia.

Its latest quarterly report was cautious, yet decidedly upbeat. Thomas Hoyer of Invision says he did not think the Nasdaq would jump 20 percent this year, but if the markets had any rationality at all, he said, they would start picking up as companies began to report more positive results.

The statement was based on published reports of fourth quarter results of high-tech companies, which were up compared to earlier quarters, as well as first hand accounts from entrepreneurs. Usually taking a board seat, Invision is hearing how sales are picking up.

Setting up a business can be enjoyable

Hoyer notes that entrepreneurs are "starting to have fun" again.

In Scandinavia, Northzone Ventures has accepted two new partners to the firm, one a former entrepreneur, in anticipation of stepping up its investment pace this year. It recently made progress in raising new capital for its fourth venture capital fund.

An early stage and proactive investor, Northzone has a strict geographic focus, covering Norway, Sweden, and Denmark, with some Finnish investments.

"A lot of venture funds have shifted to the later stage, but we are sticking with what we said we would do," says Tellef Thorleifsson, Partner.

Northzone's earlier funds' performance was high due to impressive exits during the stock market boom, Stepstone, lastminute.com, as well as a string of solid trade exits before and after the stock market bubble. "Its technological focus is wide, pragmatic and opportunistic," said Thorleifsson.

The first-time fund managed by Viewpoint Capital is on the lookout for good software firms. Its managers are continuing to follow a very strict investment strategy that targets in enterprise oriented software firms. Portfolio firms include RedDot, Impress, and Fernbach Software. It confirmed that it has its eye on three or four deals this year.

by Valerie Thompson

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