European News Roundup

MOSCOWChina’s Tencent Invests $300M in Russia’s DSTTencent, one of the largest Internet and mobile telecommunications providers in China, has invested $300 million in Russian Internet giant Digital Sky Technologies (DST).

The transaction will see Tencent acquire a 10.26% interest in the company and 0.51% of the voting power in DST.

Martin Lau, president of Tencent said: “The investment allows us to benefit from the fast-growing Internet market in Russia, as well as to leverage our technical and operational know-how to strengthen the leadership position of DST and explore new business opportunities in the Russian-speaking Internet markets.”

Founded in 2005, DST is one of the largest internet companies in Russian speaking and Eastern European markets and is responsible for prominent brands such as Mail.ru, Odnoklassniki and VKontakte. Tencent’s position in China is expected to allow DST to accelerate its growth in that region.

DST has risen to prominence through large investments in U.S. Internet companies at pricey valuations. (See “A Revealing Look at Mysterious DST,” April VCJ.) It has invested in such hot U.S. Internet companies as Facebook, Twitter and, just last month, Groupon.—A.D.

LONDONDem Leader Vows to Focus on VC

Liberal Democrat leader Nick Clegg has announced his plans for economic reform, including “regional stock exchanges [and] local enterprise funds to attract venture capital into small businesses.”

Clegg recently took centre stage in the U.K.’s battle to win the general election, winning the first ever pre-election debate, according to opinion poles.

Clegg has come out in support of creating a fund to help finance small businesses similar to the Industrial and Commercial Finance Corp. (ICFC), which was established in 1945. “We could re-establish an ICFC-like investment fund and look to provide venture capital from private investors, as well as equity and loan backing, adding a new string to the old ICFC,” he has said. —A.D.LONDONU.K. VC Trusts Reach £340MVenture Capital Trusts (VCTs) raised a total of £340 million during the 2009-2010 tax year, more than double the amount (£158 million) raised in the previous tax year, according to the Association of Investment Companies (AIC).

“This year’s impressive fund-raising will increase VCTs’ capacity to support companies which find it difficult to raise development capital,” said Ian Sayers, director general of AIC. “It is particularly valuable given banks’ continued reluctance to lend to small businesses.”

The amount raised last year was the fourth highest amount raised since VCTs were first introduced to the U.K. in 1995. The highest fund-raising year on record was during the 2005-2006 tax year, when VCTs raised £779 million. —A.DBELFASTNorthern Irish Businesses Slow on Venture Uptake

Northern Irish businesses are slow to consider venture capital or business angel funds to help them expand, according to a new survey released by the Institute of Directors Northern Ireland Division.

“Consistent with our last two surveys, almost nine out of 10 businesses have never considered seeking venture capital or investment by a ‘business angel,’ in other words someone with capital to invest and expertise to share,” said Joanne Stuart, chairman of the institute.

The survey found low awareness of government or European Union-backed financial support schemes to help businesses survive in the credit crunch. To help businesses raise capital, the Institute of Directors launched a guide to Northern Ireland businesses in January, offering information on how to raise finance and secure credit. —A.D.

DUBLINIVCA Lobbies E.U. on Regulation

A schism is forming between the Irish Venture Capital Association (IVCA) and the European Venture Capital Association (EVCA).

The IVCA has announced that it has begun lobbying the European Commission because it believes the EVCA has failed to adequately protect the venture capital industry from the most restrictive measure in the proposed directive for Alternative Investment Fund Managers (AIFM).

“Venture needs to be de-coupled from both hedge funds and private equity, the threshold needs to be increased from €500 million to €1 billion and venture funds should not have to provide sensitive information about the companies they are investing in,” says Regina Brehany, director general of the IVCA.

The Irish association has already begun circulating a letter to MEPs that so far has 346 industry signatures explaining that venture capital poses no systemic risk since it does not require leverage to complete deals.

The IVCA is not the only association worried about the impact of the AIFM directive on European venture capital. “The AIFM directive puts 20 years of building the European venture ecosystem at risk. Our competitors—large, established U.S. venture capital companies—will be the only beneficiaries,” Simon Walker, chief executive of the British Venture Capital Association, recently wrote in an open letter to the Financial Times.A.D.PARIS

Neovacs Lowers IPO Expectations

Venture-backed biotech company Neovacs has lowered its capital raising ambitions for an IPO from €20 million to €11 million.

Neovacs is a spin-off from Pierre & Marie Curie University in Paris and develops immunotherapy technology. Novartis Venture Fund, Truffle Capital and OTC Asset Management own a combined 73% share of the company.

Neovacs is not alone in lowering its target. Care home operator Medica cut the price for its IPO by about a quarter earlier this year.

Neovacs is expected to start trading on April 21. —ReutersMUNICH

VC Consortium Backs Electric Trains

Belgium-based Capital-E and French VC fund Emertec Gestion have joined an existing syndicate of Earlybird, High-Tech Gründerfonds and Silicon Valley Technology Group to invest €6.6 million in Clean Mobile, a Munich-based producer of electric drive trains.

Clean Mobile sells its drive systems through vehicle manufacturers into cargo and consumer markets. Its trains are used in electric vehicles such as electric bikes, electric scooters and cargo vehicles.

The company has already begun to commercialise its products and intends to use the new funding to finance further growth. —A.D.