Avanti Capital: full steam ahead

Avanti Capital, an entity formed earlier this year through the merger of early stage tech investors E-Capital Investments and Avanti Partners, has completed its transformation as a private equity business and has made its first investment. The investment is in Po Na Na in which it has provided £7m of acquisition and working capital finance for the buyout of up to 28 bars and nightclubs.

Julian Fellerman, joint CEO, said: “Avanti has completed its transformation. We have made our first investment which we believe will create shareholder value, have continued to manage our cash effectively and have reduced our overhead base significantly.”

E-Capital Investments and Avanti Partners (formerly Internet Incubator) announced a proposed merger earlier this year in an effort to survive the current turmoil in the market. Both E-Capital and Avanti were specialised investment firms focusing on early stage companies in the technology and Internet sectors in Europe and North America.

Following difficulties securing further funding, the boards of both firms agreed to pursue alternative strategies and subsequently, de-emphasised activity abroad and on early stage technology investments. Avanti has closed all international offices, including its San Francisco base.

Avanti Capital has a portfolio of around 17 companies and is now focused on identifying and investing in undervalued or distressed businesses in the UK. Combined funds available for investment are just over £17.6m. The funds will be used to support the existing portfolio and also to make new investments.

As an AIM-listed vehicle the business is reliant on the stock market for funding, but also benefits from its corporate finance division, which has been generating additional revenue for the group. Richard Kleiner, joint CEO, does not rule out the possibility of raising a third party fund at some point in the future.

To date, the group has realised £0.3m from the disposal of portfolio companies. As of June 30, 2003 the carrying value of the group’s portfolio was £2.5m. The group had been in discussions with Sigma Technology Management in relation to the management of the group’s portfolio of technology investments, but decided there was no material advantage in outsourcing this function and did not pursue the option further.

The group’s main shareholding is in mblox Limited, a European provider of SMS infrastructure services to the content and applications industry, which represents 50% of the current book value of the group’s fixed asset investments as of June 30, 2003. Avanti owns 7.4% of the equity of the company.

In June mBlox merged with US firm Mobilesys, a US provider of SMS services. As part of the transaction the merged company raised $8m to finance planned expansion. Norwest Venture Partners led the fund raising and participants included Novus Ventures, Duff Ackerman Goodrich and Bank of America.