MTI seeks £75m for Fund VI

The early stage European venture firm has been in the market since late last summer, as LPs adopt a ‘wait and see’ stance to making commitments.

UK venture firm MTI is raising a specialist early-stage venture capital fund on the heels of its 2008 vintage UMIP Premier Fund, according to market sources.

The firm began testing the market for a £75 million (€84 million; $107 million) vehicle – which would focus on the medical technology and cleantech sectors – at the end of summer 2008, the sources said. MTI declined to comment on its fundraising.

[GP] conversations with investors are going something like 'We are interested; let's speak again in a few months' time'.

David Ward

The escalation of the financial crisis in September, as embodied by the collapse of investment bank Lehman Brothers, meant that MTI had come to market at a particularly tough time for venture capital and private equity fundraising. Many limited partners have since struggled with liquidity levels amid volatile and uncertain markets.

“For the majority of GPs, the fundraising environment is in a state of hiatus,” David Ward, managing partner at MTI, said in an interview, “Many LPs are still clarifying their own situation with respect to allocations in 2009 and conversations with investors are going something like ‘We are interested; let’s speak again in a few months’ time’.”

If MTI succeeds in raising a £75 million vehicle, it will be its largest since its £104 million MTI 4 Fund, which it raised in 2001 and invests in early stage UK-based technology companies.

The firm made a foray into late stage seed funding last year when it raised the £32 million UMIP Premier Fund, which is meant to develop spin-put companies specifically from the University of Manchester. LPs in the fund include the Greater Manchester Pension Fund, the European Investment Fund and the National Endowment for Science, Technology and the Arts.

MTI, which invests primarily in UK and Ireland, established an office in Boston around three-and-a-half years ago in order to give its portfolio companies access to the US market.

Most European venture firms cross the Atlantic to access deal flow, said Ward, who believes accessing the large homogenous US marketplace gives MTI a competitive advantage.

“Looking at the new deals we are doing today, there are clear benefits to be reaped from accessing the US market,” he said, referring to the example of medical technology company Apatech, a company that develops a synthetic graft that promotes fast bone re-growth. Apatech, which is also backed by 3i, has enjoyed significant growth since developing its US marketing capabilities. Its revenue has grown on average by over 200 percent per year since 2005.

Ward pointed to US President Obama’s focus on healthcare reform – the new president has promised more than $600 billion to be spent on widening healthcare access over the next decade – as an indicator that the sector will continue to receive significant investment.

European early stage venture, which has historically produced inconsistent returns compared to its US counterpart, received a boost in February when Paris-based firm Sofinnova scored the largest exit in its 35-year history with the $700 million-plus sale of medical technology company CoreValve.