UK venture fund holds £22m close

Herald Ventures, run by UK technology investor Katie Potts, has held a first closing on an early-stage technology, telecom and media fund with a £40m target.

Herald Ventures, the early stage private equity investment arm of Herald Investment Management, has raised £22.25 million (€32 million; $41 million) for Herald Ventures II, the group’s second venture capital fund dedicated to early-stage investment in private UK businesses active in the media, communication and technology sectors.

The fund is capped at £40 million. It plans to invest between £250,000 and £3 million per transaction.

Herald received three quarters of the capital from investors in Herald Ventures I, a £20 million partnership organised in September 1999. The successor fund’s investor base comprises corporates, entrepreneurs, pension funds and insurance companies, according to a press release. 

Cazenove is acting as placement agent.

The fund’s investments will be overseen by Katie Potts, a technology UK investor who in 1994 founded Herald Investment Management. Potts said in an interview that the support for the new fund from existing investors was a reflection of “positive trading developments” in the underlying portfolio of Fund I.

In the press release, Potts was quoted as saying: “In spite of the difficulties associated with boom and bust in our sector, we are optimistic that the returns will be satisfactory, and relatively exceptional. I remain an evangelist that supernormal returns can be achieved with a judicious selection of management teams, and a concerted effort to work with those teams to build real businesses and real wealth.

Herald Investment Management is a London-based fund management group with approximately £400 million of assets under management. It predominantly invests in small-cap quoted companies through the Herald Investment Trust and the Herald Worldwide Fund.

Prior to setting up Herald, where she is the lead fund manager, Potts spent five years in investment management at Baring Investment Management before joining S.G. Warburg Securities' UK electronics research team in 1988.