Technology entrepreneurs should consider moving to Liverpool

The creation of a groundbreaking seed fund totaling £26.7m is dedicated to attracting ideas, technology and innovations at proof of concept, commercialisation and first round venture capital stages funding to the Merseyside area in the UK. The new Liverpool Seed Fund launched by the Merseyside Special Investment Fund (MSIF) is aimed at attracting businesses at Chilli S2, S3 and R1 stages (see The Chilli start-up definitions).

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The fund is made up of £20 million from the European Union Objective One fund, with the remaining £6.7 million coming from Barclays and the Co-operative Bank as well as MSIF itself.

Head for Merseyside to get your ideas funded
The fund will back individual entrepreneurs, new and existing start-ups, academics and businesses with ideas, inventions or pieces of technology that have genuine commercial potential. The only proviso is that the business must be based in, or willing to relocate to Merseyside.

A new organisation, “Liverpool Ventures”, has also been set up to provide a wide range of specialist support services to individuals and businesses applying to, or benefiting from the Liverpool Seed Fund. The organization will also work closely on ideas generated by Liverpool John Moores University, the University of Liverpool and other academic institutions in the region which may have intellectual property that can be commercialised.

In addition, Liverpool Ventures will offer pre- and post- investment specialist expertise and practical support on a range of areas including intellectual property, general management, research, property, legal and financial support.

The Liverpool Seed Fund (LiSF) is managed by Alliance Fund Managers, the fund management company which manages MSIF. The fund is thought to be one the largest of its kind in the UK and has already invested around £500k in several projects.

The LiSF is geared for seeding high growth, innovative technology-based start-ups in the Merseyside region. It will invest up to £100K in a proof of concept, £330K in commercialisation phase (Chilli S2, S3) and up to £750K in classic round 1 venture funding (Chilli R1), either on its own merit or with other venture fund managers.

The LiSF is expected to invest in 129 investments over the next three years. As an example, Liverpool based e-learning business Taecanet received funding from Liverpool Seed Fund with support from Liverpool Ventures.

Taecanet specialises in curriculum-based online learning. The company, set up by John Davison and Ian Nairn, recently relocated to Merseyside from Wiltshire with investment totaling over £400,000. The funding comprised £250,000 from the Liverpool Seed Fund, £150,000 from directors and other private individuals’ own investment. The company has also secured a loan facility in excess of £100,000 from Liverpool City Council and the DTI's Small Firms Loan Guarantee scheme.

Director and co-founder John Davison said, "We relocated to Merseyside because of the unique combination of quality advice, finance and practical support available to us here. Without it the business couldn't have taken off. Now we aim to develop different learning journeys for all subjects on the school curriculum and ensure as many youngsters as possible can benefit."

Investment director of the Liverpool Seed Fund, Darren Gowling, said, "We were delighted to have invested in Taecanet. We have seen a steady flow of interesting proposals since The Liverpool Seed Fund opened for business and this is an innovative company which has a strong management team and good potential."

Steve Nesbitt, chief executive of Liverpool Ventures added, "Taecanet is an exciting business operating in a global marketplace. We were pleased to have been able to support the business, help raise the funding it needed and now we are looking forward to continuing to work with the company as it progresses."

According to Gillian Hunt, business development manager at Liverpool Ventures Ltd, the Liverpool Seed Fund complements and completes other financial products that are managed by Alliance Fund Managers, namely the Small Firms Fund that provides loans (not grants) of between £3,000 and £100,000, and aims to back around 900 businesses on Merseyside by 2008. An MSIF Venture Fund which provides equity investments of up to £2m and the Mezzanine Fund provides loans between £100,000 and £1million.

Gillian Hunt added, “Unlike many business support organisations, at Liverpool Ventures we have many people with industry experience, so technology entrepreneurs should feel at home here.” Steve Nesbitt, chief executive of Liverpool Ventures, was previously CEO of GEC Alsthom and was involved in two software start-ups; Rob Rule a physicist, was one of the first people to float a biotech company.

Liverpool Ventures has a fee structure that it will charge to companies, but entrepreneurs needn’t worry as it is only payable post funding.

The Chilli perspective
There is a lot of pent-up demand for seed level funding from technology entrepreneurs who are getting increasingly frustrated as some of their ideas fall by the wayside. Those seed funds that are available come with a package which in most cases requires the entrepreneur to find a matching investor – a daunting task, especially if one is not well connected with potentially wealthy HNWIs (high net worth individuals).

Having a one-stop shop that can assist an entrepreneur with business strategy, planning and investor readiness, as well as access to a complete suite of appropriate early stage funds makes this one of the most viable propositions for tech entrepreneurs. Having industry experienced advisors on hand further enhances the compelling combined proposition of the Liverpool Seed Fund and Liverpool Ventures.

The Liverpool Seed Fund is a new type of fund that is not too restrictive, other than the requirement of being located within the region. ‘Scouser’ entrepreneurs – and for that matter non-scouser technology entrepreneurs – should seriously consider moving back to Merseyside. (For our non-UK readers, ‘scouser’ is an endearing term which refers to people from Merseyside, the home of the Beatles.)

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