£4m boost for North East business

Sep 9 2009 by Peter McCusker, The Journal

UP to 10 companies could benefit from £4m of funds by the end of the year as one of the region's main venture capital firms continues to back potential North East business winners.

Since its launch in 2004, Newcastle-based NorthStar has invested £39m in 237 companies, with an additional £41.5m of investment coming from corporates, private equity and other investors.

Successful regional businesses which have been supported with investments from NorthStar include Newcastle-based IT firm Nomad Digital, Gateshead-based Ethical SuperStore, the Tanfield Food Company of Consett, and Durham University spin-out science firm Reinnervate. And NorthStar is now looking to make substantial further investments before the end of the year. Managing director Marion Bernard said: “So far this year we have completed 10 equity-based investments and we intend to invest a further £4m in the next four months.

“We are aiming to back the best management teams across the region with funding and support to help their business succeed.

“Venture capital funding is very much alive in the North East through the activities of NorthStar. Despite the tightening of the debt funding markets, NorthStar remains undeterred from continuing to make investments in high-quality regional businesses.”

NorthStar invests the money, which comes from regional development agency One North East and the European Regional Development Fund, through two funds.

The Proof of Concept Fund (POC) invests up to £90,000 in pre-start, early stage or more mature science and technology-based companies, whereas the Co-Investment Fund (COIF) specialises in high-growth technology opportunities and will lead or participate in syndicates of investors. NorthStar normally invests between £100,000 and £500,000 alongside the co-investors.

To date, £12.9m has been invested in 199 POC opportunities and £26.1m has been invested into 38 potential, high-growth businesses.

More than £41.5m has been invested alongside the COIF funds, leading to a total £67.7m funds being raised for companies in the region.

One company which has been helped from the COIF fund is the Consett-based Tanfield Food Company. The team behind the Phileas Fogg snack brand now head Tanfield and following a series of investments totalling more than £1m, they have introduced a range of gourmet foods which can be stored at room temperature.

Recent deals have seen the company serve up its dishes on a range of airlines and train routes. These products are also available from Waitrose, Sainsbury’s and Asda, through Tanfield’s premium brand, ‘Look What We Found’.

Durham Mag Lev recently received money from the POC fund. It is the brainchild of scientists at Durham University, who have developed technology which can magnetically levitate vehicles when being tested aerodynamically in wind tunnels.

The system is positioned towards the Formula One market and eliminates the problem caused by the interference of struts usually used to hold vehicles in place.

Marion Bernard said: “With the economy in recession, the access to significant equity funding which we provide has never been more important.”