Wanted: UK Storage Startups

Calling all storage networking startups in the U.K! Penta Capital, a private equity firm based in Glasgow, has announced an early-stage technology fund and is eager to invest in this sector.

The new fund, called Pentech Ventures, is looking to fund U.K.- and Ireland-based companies in the wireless and storage markets. Pentech has raised 12 million (US$17 million) so far and plans to close the fund at between $21.2 million and $28.3 million.

“We will certainly look at a company in the data storage space; it’s one of the hottest segments now,” says Eddy Anderson, director and co-founder of the fund. He adds that they are particularly interested in the software side of the business.

“It’s a great time for us now as the sluggish economy means lots of the VCs in the U.S. are retrenching rather than investing, but there’s still an abundance of good technology companies out there looking for money,” says Anderson. In three days they’ve seen a dozen companies already, many of them coming out of the universities in Scotland. Most of them are wireless plays -- no storage firms yet.

Pentech plans to invest from $250,000 to $1 million across 10 to 12 companies in any one round. But don’t go booking the Caribbean cruise just yet: The criteria for investment are rigorous.Firstly, Pentech’s looking for intellectual property that’s been copyrighted or patented, or a contract or skills that are not available anywhere else. The potential investee must also have global potential. “We won’t get the returns we are looking for from a company that just targets the U.K.,” says David Armour, director of the fund. And lastly, a good management team -- that doesn’t have to be complete but must have a proven track record -- is essential.

Armour says all the layoffs going on right now -- most notably Marconi Communications PLC’s (Nasdaq/London: MONI) decision yesterday to axe 4,000 jobs -- means there’s plenty of talent and ideas floating around. “We’ll scoop up these guys, spend the next 18 months developing a product, and by the time we’re ready for production, the financial markets should be back in shape."

Still, it’s going to take more than wishful thinking to make these companies work, and Pentech is unable to draw on tech experience from its parent, Penta Capital, which funds hotels and restaurants for a living.

Instead, it has hired a proven entrepreneur (Anderson) and a chartered accountant (Armour) to head up the fund. Anderson was co-founder and CEO of Objective Software Technology (OST) which he sold to Wind River Systems in 1998 for $3.7 million. Armour has more than 10 years experience as a chartered accountant, advising corporate and institutional clients in private equity deals. As a partner at AMCo, he helped establish the firm as one of Scotland’s foremost corporate finance advisory practices.

Between them, they appear to have the credentials. Now all they need are companies willing to take up the challenge.— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com