Following regulatory concerns, Paul Deakin, previously in charge of Venturedome’s investment arm, has recently undertaken a management buyout of that part of the business. The new venture capital firm established by Deakin is called Private Capital Exchange and operates out of both London and Manchester.
Access to the private equity market is limited for private investors and it is this fact that has driven the Private Capital Exchange business model. Deakin notes that the private placing market was worth GBP100 million in the UK three years ago and in the last two years he says that figure has doubled each year. He notes increased wealth, attractive tax benefits for private investors (the Enterprise Investment Scheme, for example), and private investors becoming more sophisticated. Thankfully that sophistication extends to an interest in investing in technology companies, which is Private Capital Exchange’s target investment sector.
“Access to private capital investment opportunities market is limited to well connected Angel-type investors and even these individuals find it difficult to generate and maintain a consistent quality of deal flow,” says Deakin. What Private Capital Exchange intends to do about this is provide that consistent quality deal flow to private investors. These investors, says Deakin, are typically looking to build up a technology portfolio with around ten investments, taking part in around four deals per year. And these investments can be as low as GBP5,000 per time.
On an operational level, Private Capital Exchange will not be raising a fund but will draw funds from investors at the time of each deal. Deals will be underwritten by Springboard, which backed Private Capital Exchange when it was still part of Venturedome. This investment model is the same one that Deakin was proposing to follow when he was with Venturedome. However, a deal has yet to be done since Private Capital Exchange only received SFA regulatory approval on September 14. It launched its website at www.privatecapitalexchange.com a week later.
Deakin has a full team on board three other investment directors that he winnowed out from 5,000 applications received when he placed an advertisement in the Sunday Times. Tom Jacobs is an American who for four years ran a global $150 million fund for the Central American Development Company; Chakri Lokapriya was with JP Morgan as a technology analyst; and Nigel Rawlings is a trained accountant who until recently has worked as an independent consultant specialising in fund raising, particularly for companies in the pharmaceutical industry.
Deakin himself started his career at PricewaterhouseCoopers and then spent three years at 3i before moving to NM Rothschild where he was latterly head of corporate finance in the north of England at Arthur Andersen.