Shackleton buys NESTA stake in healthcare company

Shackleton Ventures has deviated from its typical direct secondaries strategy, making a follow-on investment into medical technology company Nanosight. It purchased the stake from UK government-backed NESTA, which hopes the deal will set a precedent for early stage secondaries investments.

UK-based firm Shackleton Ventures has doubled its stake in medical technology company NanoSight, paying an undisclosed amount for a 7.5 percent stake from the UK’s National Endowment for Science Technology & Arts (NESTA).

Shackleton usually buys portfolios of venture investments so a single, follow-on transaction is unusual for them, managing partner Hugh Stewart said in an interview. He said the firm increased its investment in the company because “the deal made sense” and they were keen to take advantage of opportunities within healthcare.

NESTA, an independent body which typically provides seed capital to UK start-ups, invested in NanoSight in 2004. The firm said its decision to divest the stake was a combination of things including being offered a good price and having backed the company for a few years. Investment manager Paul Vickery said in an interview that the divestment had nothing to do with liquidity problems, but instead was part of a strategic move to set a precedent for early stage secondaries investments.

The investment was made from Shackleton Secondaries II Fund, which was formed in 2007 at £25 million, with backing from an unnamed European fund of funds investor.

Shackleton acquired its initial stake in NanoSight in early 2008. The Wiltshire-based firm manufactures instruments used in the identification and analysis of nanoparticles, which are sold to universities and companies developing nano materials like catalysts, viruses, magnetic and pharmaceutical particles.

NanoSight’s sales have increased by 70 percent since last year, the firm said. In November 2008 it closed a £1 million funding round with investment from Bristol-based investor Rowan Dartington and London Capital Investment Partners among others. South West Ventures has retained an undisclosed shareholding in the firm.

Shackleton has taken advantage of the secondaries opportunities provided by UK private equity giant 3i, which has moved away from early stage investing. Shackleton finalised the acquisition of 3is stake in Macalla Software in December, while in 2007 it bought 13 portfolio companies from 3i.

Shackleton’s activities are a bright spot amid the gloomy prospect for UK venture capital revealed in research by the British Venture Capital Association. A recent survey of 80 venture capitalists found that 75 percent of respondents expect total venture capital investment to decrease in 2009 compared to 2008, while one in 10 expects it to stay the same, and only 16 percent believe it will increase.