LONDON/BOSTON – 3i will open specialist technology investment offices this summer in Boston and Silicon Valley, a move that underlines the firm’s ambition to create the first integrated global technology business, said Director Martin Gagen, who will head expansion efforts in the United States.
The firm previously launched a venture capital business in the U.S. during the early 1980s but pulled out at the beginning of this decade to focus more closely on building its European business prior to its own initial public offering. Part of the earlier 3i business was effectively privatized, becoming Aspen Ventures. 3i maintained a connection with Aspen, investing in two subsequent funds.
Outlining the reasons behind 3i’s decision to cross the Atlantic a second time, Mr. Gagen observed, “3i’s technology business, which was at the fledgling stage when we opened our first U.S. business, is now of a completely different order of magnitude.” 3i’s technology portfolio now comprises more than 450 companies, and technology investments represent one-third of the group’s business by value, Mr. Gagen said.
Few would deny that a global perspective is a prerequisite for successful technology businesses, something of which 3i is keenly aware. Many of its limiteds have sought to enter the U.S. market, either to build up sales operations or to position themselves for Nasdaq IPOs. “Although we do not have a direct presence in the U.S. market at the moment, our current U.S. portfolio is probably larger than when we had offices there,” Mr. Gagen said.
Benefits of a Local Presence
The relaunch of an American technology business is clearly a logical step for 3i. “The market has told us that, to develop the first genuinely integrated technology investment business under the 3i brand, we need local presence and networks in the U.S.,” he said.
A local presence should enable 3i to manage syndicates with American investors and to generate reciprocal deal flow among its European, Asian and U.S. networks. The U.S. technology team will work closely with 3i’s European and Asian offices to maximize the value that its international scope can add for investees.
While 3i covers the entire spectrum of technology sectors in Europe, for the time being its U.S. operation will focus on specific information technology and telecommunications niches. Mr. Gagen said 3i believes that business-to-business, rather than business-to-retail, e-commerce is a major value area at present but conceded that “value shifts in technology can happen quite quickly.”
3i is not setting out at this point to make new U.S. biotechnology investments, but the group may invest to support European biotech businesses seeking to enter the American market.
3i has no illusions about the highly competitive nature of the U.S. venture capital market and does not intend to go “head-to-head” against indigenous firms on their own turf. Instead, Mr. Gagen explained, 3i will target opportunities where its status as an international investor is a benefit.
Ultimately, 3i expects to develop a broad technology investment business in the U.S., providing funding for companies at all stages of development. “U.S. venture capitalists have developed great mechanisms for creating value in businesses from early-stage to IPO,” Mr. Gagen said.
The new U.S. offices initially will be staffed by six to eight seasoned technology investors from the group’s European network who will have experience in the U.S. Thereafter, Mr. Gagen said, 3i will actively recruit Americans, building a staff of 20 in its U.S. offices within the next year to 18 months.