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ICT Trends for 2006
17/01/06
The largest growth areas for a US Venture Fund are multi media
and security with open source also representing large growth opportunities.
Steve Smith, Sector Director for Merseyside, explained ‘Open
Source provides an alternative to the method that software has
historically been produced; traditionally it was bought in as
a licence. Now the software code is available in the public domain
and other developers can utilise the software on the understanding
that they return the developed code back into the public domain
with any changes they have made.
This actually has the effect of opening up markets. Skype, recently
purchased by EBay, developed software that allowed telephone calls
to be transported over the internet. This enabled effectively
free telephone calls over any distance across the globe and has
impacted the Telecommunications industry significantly.
Steve Smith said we recently had a discussion with Flagship Ventures
in an early stage venture capital firm in Cambridge MA focused
on creating, financing and building innovative companies in the
Life Science and Technology sectors. Much the same as in the UK
Venture Funds are becoming much more thorough in their due diligence
and have sharpened up considerably after the 2000 "dot com"
bubble burst when many of the transient investors lost their shirts.
Early in 2005 the bulk of investment from Technology fund VC’s
were in Life Sciences. This was indicative of the market. Now
at the end of 2005 Software and e-commerce is now accounting for
28% of investments and Life Sciences are at about 20%.
E- Commerce is becoming acceptable again with the financial markets
having a much better understanding of what E-Commerce is and what
it can and more importantly what it cannot do. Effectively E-Commerce
has matured and thus is attracting more investment – it has
come of age.’‘In the recent visit to Boston to research
opportunities for Merseyside’s ICT sector we found that there
was no specialist IT businesses servicing the life sciences sector.
Bio informatics is not the money market that is was predicted
to be. The majority of applications are in pre-revenue areas with
long gestation periods. The growth area for IT is in reducing
the R & D phase in areas like the pharmaceutical industry.
In fact they are looking for IT to make these leaps for them.
In the pharma industry typically there is a 12 year cycle to create
a block buster drug each day in bringing the drug to the market
can cost $1 million per day in future lost revenue.
With the smaller niche drugs there is limited return as there
are less people with rarer diseases. This represents a huge  opportunity
for the IT industry to build a whole machine around R & D
for pharma.
The next 12 months will see much development built around digital
content. The catalyst for this is Apple’s Ipod which enables
download for feature films and TV programmes to small computer
devices. This may help stimulate the market of digital content
production. TV companies are rubbing their hands with glee and
the number of devices now sold which enable content on demand
means that there are potentially huge markets of previously produced
content that can be resold to a new market of handheld devices.
Richard Branson recently made a bid for NTL which brings some
new players into the mobile phone space. This is a dynamic market
and the larger players of tomorrow could be either Apple or some
of the new smaller players. For the consumer there will be more
choice, lower prices for the consumer. Market dynamics means that
the consumer will demand quality of delivery. This complements
a very rich digital content and media industry. It is worth noting
that Merseyside is home to the only digital content business school
in the UK, ICDC and thus well placed to exploit this new market
dynamic.
‘The 2004 Library House Spin-out Monitor
identified 435 technology spin-outs from the 36 leading research
universities in the UK. Of these, 46% were from the Life Science
sector and 38% Information Technology. Of the 435 spin-outs, 65%
were at the seed funding stage, 15% had received series A funding,
8% series B funding and 5% series C or later while 7% have gone
public, been acquired or merged. In 2004, 12 of these spin-out
companies went public.’ ••
It will be interesting to see where the spin outs and seed fund
investments are made in 2006. Liverpool Ventures provides an assessment
service for companies applying for investment from the new £27m
Liverpool Seed Fund.*
During the last 12 months enquiries from companies creating software
and working on developments in multi media, security and medical
devices have represented a large percentage of the total number
of enquiries.
••Source: Creating Success from University Spin-outs
Nov 05 (Review conducted by Library House on behalf of the BVCA)
*Liverpool Seed Fund is an MSIF fund managed by Alliance Fund
Managers (AFM). AFM is regulated by the FSA in the course of investment
business.
Ends
For more information contact:
Gillian Hunt
Liverpool Ventures
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