Thursday, 30 October 2008

MessageLabs brothers to setup new UK tech venture fund

(By Richard Holway) Firstly, an apology that, due to my trip to China, I did not complete the MessageLabs story that I started with my 10th Aug 08 post - MessageLabs – For Sale or IPO?. It was quite a long, background post, detailing my meeting with founder Ben White when I visited their Gloucester HQ. So I suggest you reread it if you are interested. In it I suggested that the most likely outcome of their ‘strategic review’ was a trade sale rather than IPO. And that’s exactly what happened on 8th Oct 08 when they were bought for c£400m by Symantec. See FT 9th Oct 08 MessageLabs sold to Symantec for £397m. Pretty good when you set that against its revenues of £73m and operating profits of £5m in the year to 31st July 08. It had been loss making in the previous year and, let’s be honest, has had a pretty variable financial record since the off.

Ben and his brother Jos held c26% of the equity. So what do with £100m? This week we found out as the brothers announced they were using £20m of the proceeds to set up a UK-focussed tech venture fund. See FT 26th Oct 08 UK tech start-ups get a new message.

“The new fund aims to complete about four to six deals a year with about £10m-£20m earmarked for mid-stage companies and £2m-£4m for early stage companies”

Interestingly, the fund “will focus on technology services, especially companies with high recurring revenues and those that use software as a service”. MessageLabs, of course, was essentially a Cloud solution to the virus/security problem. I remember Ben explaining that we take for granted that our water will be purified before it’s put in the pipes to our homes. So why do we all seem to think that that best solution to ‘purify’ our emails is a local purification plant on every PC? Centralised purification was MessageLabs’ USP.

Actually, I think that now is a great time to setup a tech venture fund. The last thing you want to do is set it up at the height of the boom – as many funds set up in 1999 and 2000 are still finding to their cost. Not only will there be some great bargains around in the next year but, as I have said before, downturns are exactly the time when the rate of technological change accelerates.

No comments: