14/10/09 Rare window of opportunity for Finance Wales
Finance Wales has a two-year window of opportunity to invest in indigenous businesses with its new £150m fund, while other lenders focus on repairing damaged balance sheets.
And its investment director, Peter Wright, said that the Assembly Government's investment bank subsidiary has already invested £10m of its new super fund - of which half has been sourced from the European Investment Bank.
The fund, which unlike previous funds has no geographical limitations within Wales, has also allowed Finance Wales to increase its investment threshold to £2m, compared to just £1m in previous funds.
Mr Wright said: "What is so good about this new fund is that it is here at the right time. We have a window of opportunity this year and next when the banks are not in the market, or other funds as they don't have the money either.
"There are no other equivalent funds like ours, so we need to be funding and making the most of this opportunity, as clearly the banks will come back.
"Our message to businesses is this is the time that you should be investing. We put a proposal to our board a year ago that 2009-10 would be the time when we needed to be investing.
"If you invest in a downturn that is where you do best, as the businesses that are surviving now have the ambition to grow and when the better times come they just hit the accelerator and are away."
Mr Wright said that Finance Wales' first two funds - backed with European Union Objective one and Two funding with match funding from Barclays Bank -were not without their mistakes.
The finance from Barclays Bank is due for repayment in 2011. Mr Wright, who joined Finance Wales in 2004, said: "We expect to have repaid the vast majority of that money in both those funds by the middle of next year. There will be other stuff [sale of equity investments] that will come in after 2012.
"However, the Objective One fund in my eyes is not going to be a rip-roaring success. Finance Wales at that stage was a brave new world, as no-one had tried to make mezzanine investments in Wales before, or equity investment on the scale that we were trying to do.
"Inevitably, there was sharp learning and sometimes that was a bit painful.
"There were a lot of deals which, in hindsight, would not have been done, in all due respect to the people that were here."
He said that fund one was likely to "wash its face", although there were still around three yet- to-be-realised equity investment sales which could still come through.
He said that Finance Wales would look at more co-investments - an area where it has been active in recent years with Fusion IP, which owns part of the intellectual property coming out of Cardiff University.
Mr Wright said: "With some early stage medical devices companies you probably need £10m to get to the stage where you can sell at the right level of profit.
"We don't have that firepower, therefore we will co-invest from day one."
Finance Wales is currently brokering talks with a number of US-based venture capital funds as potential co-investors in Welsh companies.
He added: "There are so many VCs in the US in that space, that they are now looking at Europe.
Mr Wright said he was "having the time of his life" with Finance Wales.
He added: "We have money to invest in Welsh companies and businesses looking to relocate here. They need finance and we can make some fantastic investments to help them grow.
"We are doing what we came here to do [a gap funder], but the gap has just got a whole lot wider [up to £2m with the new fund]."