3i combines venture and growth capital teams

The move underlines the firm’s rapid expansion of its growth capital business in contrast to its smaller commitments to venture capital following a wave of post dotcom crash write-downs.

3i has merged its venture and growth capital teams into a combined Technology Media and Telecommunications (TMT) team, formalising the firm’s shift away from early stage venture.

3i’s spokeswoman said: “We’re doing this because we believe there is a big opportunity in TMT and this is an evolution of 3i’s growth capital strategy.”

3i has been focussing on late stage venture and growth capital, having gradually wound down its early stage small and medium investment (SMI) arm. The firm only invested £6 million ($12 million; €7.7 million) in the nine months to 31 December in SMI compared to £1.78 billion invested across its overall portfolio.

In the same nine month period it invested £125 million in venture capital and £738 million in growth capital.

Like a number of its peers 3i’s venture capital investments suffered from a wave of writedowns in the years following the dotcom crash which totalled more than £1 billion.

Despite such discomfort in the venture space, the firm will continue to invest in later stage venture prolonging its strategy over the last few years. 

The 3i spokeswoman said: “[The write-downs were] largely caused by the adverse markets for both listed and unlisted early stage technology assets to 2003 to 2004, since when the business has been very successfully focused on late stage technology investing, which has led to its merging with the growth capital business.”

The firm’s venture capital portfolio was valued at £715 million and its SMI portfolio was valued £312 million in September 2007.

Of the SMI portfolio £271 million was more than seven years in age, while the venture capital portfolio was more widely diversified with assets bought in the last three years valued at £446 million or more than half the portfolio.

The firm has massively increased its commitments to growth capital in recent years. In September the group’s growth capital investments were £1.85 billion of an overall portfolio of £5.13 billion. More than 70 percent of this growth capital investment has come in the last three years.