Bridging the gap(2)

E-Synergy launched its new ECF fund last night from atop the Tower Bridge, at the same time announcing its first investment in a company with a unique partnership with a Ukrainian university. Dave Keating reports.

It was perhaps a fitting location to launch a fund attempting to bridge two different levels of funding. E-Synergy, a London-based early-stage technology investment firm, chose the top of London’s Tower Bridge as the venue to launch its £30 million ($59 million) Sustainable Technology Fund, one of the new funds set up under the UK government’s flagship Enterprise Capital Fund initiative. The initiative is an effort to bridge the equity gap UK businesses encounter when they need to raise between £250,000 and £2 million, too little for most venture capitalists but too much for friends, family or personal contacts.

What seemed to really clinch the deal was when we offered them a student exchange program, for their students to come to the UK,

Nicholas Cox, Earthcare

The investors, venture capitalists, entrepreneurs and intermediaries gathered in the long, glass-enclosed planks between the two towers were given the opportunity to learn not only about the new fund, but also about its first investment, Earthcare Products. The fund has invested £325,000 in the company, which is developing and commercializing new natural refrigerants that can enhance energy efficiency and reduce emissions caused by refrigeration.

As he gazed out at the impressive view, Earthcare managing director Nicholas Cox remarked that the investment was both welcome and much needed. The company has a number of air conditioning products it is currently marketing, but the revenue from these products is not enough to fund the new research and development the company is eager to pursue. Cox said the company has been looking for funding for over a year but has had difficulty finding any, owing to the equity gap in financing available. E-Synergy, he said, was the only investor who would take them on.

Founded in 1997, the company is eager to start new R&D because of a recent licensing deal it struck with the Odessa State Academy of Refrigeration in the Ukraine. The agreement gives Earthcare the exclusive right to commercialise its research into low environmental impact refrigerants and associated refrigeration systems. Acknowledging that intellectual property licensing agreements with former Soviet republics are not all that common, Cox said his method of finding the technology was quite unorthodox as well.

“To be honest, I just found them through a Google search,” he said. “I was looking for a specific technology and I entered the search terms and they came up, so we contacted them.”

Cox said that working with a former SSR university had its unique challenges, most notably because the university had never had to negotiate such an agreement before. Surprisingly, he said, the most important thing to the university was receiving cash up front, rather than receiving a percentage of the profits or steady licensing revenues.

“What seemed to really clinch the deal was when we offered them a student exchange program, for their students to come to the UK,” he said.

Jon Moulton, keynote speaker at the launch

Earthcare did offer the university a small percentage of the revenue generated by the IP as well, although the university wasn’t asking for it, said Cox.

The Sustainable Technology Fund is the only ECF to focus on providing investment and expertise to UK companies developing clean and efficient industrial processes. It is targeting between 15 and 20 investments in companies that can provide evidence of early sales, accelerated growth prospects and a credible management team and business plan, said E-Synergy chief executive Andrew Stevenson. E-Synergy has provided £10 million of the total £30 million funding through its own private investor group, with the rest coming from the government.

Speakers at the launch event included Jon Moulton, founder of Alchemy Partners and a major E-Synergy investor, who noted that he hopes more international investors than are currently involved will take advantage of the ECF scheme in the future, as it is far more accessible to them than other types of government-initiated funds.