London, England - October 19, 1998 - Pond Venture Partners Ltd. is the first venture capital fund to invest in British technology companies while taking a truly global perspective. The new UKP8M (US$13M) fund is unique in that its three partners are on three different continents - London, Silicon Valley and Tokyo.

"We bring the best of Silicon Valley's fast-growth mentality and Japan's consumer dominance to an excellent base of small technology companies in the UK," said Richard Irving, Pond's Silicon Valley partner. "This gives our portfolio companies a global market in which to maximize and sustain growth."

Pond saw that while the UK is burgeoning with exciting small technology companies, little early stage venture capital was available. Although the total UK venture capital pool in 1997 was $6.9B, 54% of that in the US, most UK investments were in buyouts and other late stage opportunities. An early-stage company in the US was eight times more likely to be funded than one in the UK.

"Early stage technology companies in the UK are starved of real venture capital, since venture capitalists here too often don't understand technology," said Charles Irving, Pond's London partner. "As a result, UK companies cannot make the dynamic, costly investments needed to capture leadership in rapidly growing markets. Pond aims to break this trend."

Even if companies find the money they need, help to grow the business is often lacking. In contrast, venture capitalists in Silicon Valley help portfolio companies to build their management team and develop key customer relationships.

"US companies are successful because they attract strong funding, have strong management teams and key customers," said George Hara, Pond's Tokyo partner, who has over fifteen years of successful venture capital experience in US technology success stories like PictureTel and Borland. "The US venture capitalists play key roles in this process, not only bringing the money but also strengthening management and making key customer introductions."

Building Global Companies From The Ground Up

Mr. Hara believes the US venture capital model can be taken one step further.

"The technology markets are so large in the US that companies can often be successful without an overseas strategy," said Mr. Hara. "But Pond believes that long-term success requires even small companies to rapidly build an international presence. We will help our portfolio companies become established players in key markets - not only in Europe and the US, but also in Japan and Asia. In this way we are building truly global companies from the ground up."

All of this value added will take much of the partners' time and energy.

"If we want to add this much value after we invest, we cannot do this for 20 or 30 companies simultaneously," said Richard Irving. "We have therefore started a small fund and will invest in only five or six companies, which have been hand-picked to meet our highly selective criteria."

Pond is looking for companies whose products meet a clear market need, have defensible technology advantages and need the capital to grow rapidly into large, profitable enterprises. Target areas are mainly under the heading of IT infrastructure, specifically bandwidth deployment enablers, converged and integrated networks, fiber-optic and broadband communications technology, infrastructure technology, PCS and wireless communications technology, network management & security, bandwidth optimization, and IC companies based on an intellectual property licensing model.

"We are investing in companies with core technology, the stuff at the heart of rapidly expanding infrastructure, not gimmicky, unproven ideas," said Charles Irving. "We believe such companies will form the backbone of the new world of communications, which is now experiencing accelerated deployment."

Pond has already made its first investment. In May the fund placed $2M into Microcosm Communications, who are developing analog chips for the burgeoning fiber optic communications market. The company is already seeing the benefits of its relationship with Pond.

"A year ago I was wondering how I could raise the venture capital I needed," said Gary Steele, Managing Director of Microcosm. "Not only has Pond provided the needed funds, they have also helped us refine our strategy and made crucial introductions to key customers both in Japan and the US."

Pond expects that this fund will be the first of several, with future funds selectively widening the geographical focus.

"Over the last three decades we have seen billions in venture capital invested in the US," said George Hara. "Over the last decade, we have witnessed an explosion of venture capital in Israel ,where there are now over 2,500 high tech companies. We believe the UK is the next big opportunity. After that, we expect other European countries to provide attractive possibilities, spurred on by the emergence of a single European currency. As we raise future funds, we will selectively add these to our UK focus until we build a wide-reaching network of international venture capital."

These might sound like lofty ambitions, but the goal is not merely to build a profitable investment enterprise.

"The ultimate goal is to allow these hitherto separated geographical markets to communicate, cooperate and prosper to mutual advantage," said Charles Irving. "The single European currency, coupled with the 'death of distance' which low-cost communications enables, means that we can all look forward to a very exciting future."

Pond Venture Partners

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