25 August 2016

UK fibre optic technology developer among angels’ targets in August

At the time of writing there have been 20 European angel investments worth a combined EUR 18 million signed off in August 2016 to date. These figures are undoubtedly disappointing and mean there is a mountain to climb in the next nine days if results are to reach the same levels as in July, which it must be noted, was also a disappointing month when compared to those which preceded it. It seems unlikely that enough deals will be announced in the next week and a half to come close to the 44 deals announced during July, but a few high value injections could bring the aggregate consideration nearer to the EUR 74 million invested last month. If results stayed at the current level until the end of August the month would be the lowest-performing by value since February 2013, when just EUR 17 million was injected into European companies by angel investors. Since that figure has already been surpassed the EUR 39 million invested in February 2016 seems a more realistic target, but the importance of individual large considerations cannot be overstated; months which performed well so far this year have seen single deals worth as much as EUR 30 million, while May actually had one worth EUR 96 million and April had one worth EUR 64 million. It is clear that more transactions on this scale are needed if August is to perform well; at present the month’s largest European angel investment comes in at just EUR 5 million, which, while still a sizeable investment for angels, is on nowhere near the same scale as the aforementioned transactions.

August’s most valuable angel investment so far involves Spanish courier collaboration mobile application developer Glovoapp23, which secured EUR 5 million in a round led by led by Entree Capital, Seaya Ventures, Antai Venture Builder, Bonsai Venture Capital and Caixa Capital Risc SGECR and also including Zaryn Dentzel, Felix Ruiz, Cube Investments, the Crowd Angel and Bernardo Hernandez. This deal alone accounted for 28 per cent of total investment for the month, highlighting the significance a single transaction can have on overall dealmaking levels. The month’s second-largest European angel investment was worth EUR 3 million as UK-based mobile temporary jobs recruitment application provider Syft Online brought in a seed round from former world champion boxer David Haye, Lord Young, Mike Kershaw, PROfounders Capital and other undisclosed investors. There have also been five angel investments worth between EUR 1 million and EUR 2 million signed off in August to date and more transactions on this scale and considerably larger would be needed for the month to come close to competing with other recent periods.

Generally when angels target a sector which is distinct from their normal areas of interest the deal stands out. The software industry obviously benefits considerably from angel attention, but another area in which they have invested fairly regularly over the years is research and development into the physical, engineering and life sciences fields. One deal announced in August is a good example of this; UK-headquartered Synaptec, which develops fibre optic technology for electric power networks, brought in EUR 440,000 from Equity Gap, Scottish Investment Bank Ltd, the investment arm of Scottish Enterprise and the University of Strathclyde. The company said that proceeds of the funding round had been earmarked for the ongoing growth of its team, alongside continued expansion of the business’ scope and helping it gain access to the renewable energy and subsea markets. Glasgow-headquartered Synaptec was established in 2014 and develops photonic sensing systems which utilise existing optical fibre networks to help electricity network operators assess their systems in terms of health and capacity. The technology can be used to monitor voltage, current, temperature, strain and dynamic vibration. Synaptec says its goal is to reduce the downtime and operating costs of electrical power networks. Following receipt of the funding round founder Dr Philip Orr highlighted the importance of this issue, saying that increased demand for electricity and the move towards renewable energy has made it more crucial than ever.

There have been a number of other cases of physical, engineering and life sciences research and development companies being targeted by angel investors in recent years. Zephyr shows that 203 such angel investments have been signed off worldwide since the beginning of 2006. The largest of these transactions closed in January 2014, when Pennsylvania-headquartered Aquion Energy received EUR 40 million from Bright Capital, Microsoft founder Bill Gates, Gentry Venture Partners, Advanced Technology Ventures, Foundation Capital and Kleiner Perkins Caufield & Byers. That was closely followed by a EUR 38 million injection into another US company as Second Genome brought in a Series B round worth EUR 38 million from Pfizer Venture Investments and Roche Venture Fund, among other investors including Matthew Winkler. Other companies operating in the sector to have been targeted since the beginning of 2006 include Proteon Therapeutics, Quanta Fluid Solutions and LightSail Energy.

To sum up, August has been a fairly slow month for European angel investment, but after a few promising months it may be that investors are simply catching their breath before gearing up for another push as we near the end of Q3. It will be the size of the largest investments, rather than the overall number of deals, which determines how successful the remainder of 2016 is.

© Zephyr