nCoTec ventures and Frontiers Capital, both early stage technology investors in the communications space, have merged and the new entity will be known as Frontiers Capital. The merger sees Tim Horlick, founder of nCoTec, and Nigel Spray, founder of Frontiers Capital, leading the merged entity as joint managing partners. Spray and Horlick worked together at Kleinwort Benson in the 1980s through to mid 1990s, something they both point to as a positive indicator that the merger will work, aside from the overlap in investment outlook of the two entities.
They have lost just one team member and will be five investment professionals and three administrative staff now the merger is agreed. Both firms each operated one fund, both of which will be renamed: nCoTec I LP becomes Frontier Capital I; and Wireless Frontiers I LP becomes Frontiers Capital II.
nCoTec was formed by a group of ex-investment bankers at the high of the tech bubble in 2000, while Frontiers Capital emerged in May 2001. Previously Frontiers Capital was the corporate venturing arm of Carphone Warehouse until in May 2001 Spray structured a deal whereby the investments in Carphone Warehouse’s fund were transferred across to the newly created Frontiers Capital and new capital was bought into the fund from new investors.
Spray says the structure has aroused significant interest among the private equity community. It is something that Spray and Horlick intend to replicate in coming months in order to grow Frontiers Capital.
As things stand the newly merged firm has 17 investments and has committed €100m of its €125m capital. The remaining €25m is largely ring-fenced for existing portfolio companies, which Horlick is optimistic will perform well. But with the pick up in technology stocks, sales traction and so forth only just beginning in Europe and so returns and therefore technology venture fund raising some 18 months or more away, Frontiers Capital will in the short to medium term concentrate on the acquisition of secondary direct investment positions, as well as managing its existing portfolio. As with the Carphone Warehouse portfolio, any positions that the firm buys into will be funded from third party monies raised on a deal by deal basis. This could involve taking on the management of whole or parts of portfolios.
Both nCoTec and Frontiers Capital raised funds from large technology corporates and have spent sometime rethinking the advisory board of the newly merged entity, which is now in place, although the advisory board has yet to be confirmed.
On the supervisory board are Strone Macpherson (chair and former deputy chair of Misys plc), Dr Hannes Androsch (former vice chancellor of Austria), Ohad Finkelstein (chair and CEO of Interoute Group), Thierry Nicolle (head of business development Pervasive Computing IBM), Frits Vromen (former head of NatWest Equity Partners in Germany.)