CLUSTER BUCKS TREND

A recent study suggests that the heart of European venture investing may be beating strongest in a small region of middle England. The Cambridge Cluster Report 2004, produced by independent research consultancy Library House and financial advisers Grant Thornton, showed that the Cambridge Cluster – a group of leading technology and innovation companies centred around Cambridge – have attracted more investment than any other region in the UK or continental Europe in the past 18 months.

Having weathered the post-bubble VC downturn better than the UK as a whole and the rest of Europe, the Cambridge Cluster is rebounding earlier and more strongly than other European venture capital hubs such as Munich and Amsterdam, the survey says. Cambridge secured more than 25 percent of the UK's venture capital investments and more than eight percent of the European total in the first half of 2004.

Another significant finding shows that during the same period, individual funding rounds for venture-backed companies in Cambridge were between 57 and 100 percent larger than in the rest of the UK and Europe.

The message from Cambridge seems to be that while local VCs may be backing fewer companies, they are backing them harder, thus giving them a better chance to succeed – a strategy long-desired by European venture practitioners who bemoan the short-sighted approach too often adopted when backing portfolio companies.

In the recent European venture capital roundtable discussion published in our October 2004 edition (Private Equity International 29), Kate Bingham, general partner at Schroder Ventures Life Sciences, made this very point: “For too long, European VCs have underfunded their portfolio companies and not given them enough of a chance to develop. It's been a real problem for [earlystage] companies in Europe”. Evidence from the Cambridge Cluster suggests that that trend may finally be starting to be bucked.