A new investment fund is to pump £40 million into cloud and software-as-a-service companies in the UK. It will use a mix of government and private fundings to target high-growth SMEs with investments of up to £2 million each.
The fund is named ‘Notion Capital Fund Two’, after the cloud-focused investment company that will operate it, Notion Capital. It is hoped that it will repeat the success of its predecessor, which backed British technology SMEs including cloud services provider Star and e-invoicing service Tradeshift.
The fund’s UK activity will fall under the Department for Business, Innovation and SKills’ Enterprise Capital Funds programme, which aims to address market weaknesses in the availability equity finance to SMEs by combining government funding and private sector investment. The fund will be the 11th and largest ECF to date, BIS said.
Business and Enterprise Minister Mark Prisk said it was vital that small companies have access to this sort of finance in order to expand and grow. “This new Enterprise Capital Fund will provide at least £40m of funding to viable UK high-tech businesses," he said.
“Notion Capital is the largest Enterprise Capital Fund to date and will help a significant number of firms to grow and create jobs, boosting our economy.”
The Notion Capital Fund Two is worth £62.9 million overall, and will invest in cloud and SaaS SMEs across Europe. The investment firm fund to reach nearly £100 million after a further round of fundraising.
Notion Capital was set up by Jos White, the founder of secure email cloud service provider MessageLabs, which was acquired by security and storage giant Symantec for £310 million in 2008.
"We believe that there is now an under-supply of good quality funds serving an ever-increasing and ever-widening market opportunity within Europe," wrote White on Notion Capital’s blog today. "This imbalance will lead to a larger market share for the investors and also stronger and more experienced partners for the entrepreneurs. The results could mean a step change in the performance of European VCs that will in turn lead to further growth and investment in the market."