Frog raises fundraising target as market croaks

In spite of adverse economic conditions, UK early-stage and growth investor Frog Capital has actually increased the size of its fund from EUR60m to EUR100m - a move almost unheard of in this economic climate. Frog is the new name for Foursome Investments, the investment vehicle of the Engelhorn family, and the fund increase will see the vehicle reposition itself to focus on not only cleantech, but also IT and digital media investments. Mike Reid has joined as new managing partner from 3i Growth Capital.

At a time when several funds are downsizing or even withdrawing from the market, Reid feels that Frog can benefit from the economic downturn: "Beneath the surface, there are niche markets that are actually performing better now, particularly in the technology sector." He goes on to say that if investors look for the right submarkets and entrepreneurial teams, they can do really well. "Smaller companies with sensible valuations and steady cash flow typically perform better than larger ones. Many funds are so consumed with the bad market that they are missing their niches."

Frog recently made a further investment in Hydrodec, which according to the firm is one of the only businesses that recycles transformer oil - a plus in a down market: "Because of the recession, companies that need transformer oil are opting for the recycled version because it is much cheaper than digging it up from the ground," commented Reid.

Frog specialises in European growth stage venture capital and private equity investments. Frog's current portfolio consists of six cleantech companies, a sector it began to focus on in 2003. Its latest deal, Ostara, is a Vancouver-based company that specialises in a technology that enables water and sewage companies to recycle phosphoros without the use of harmful chemicals.

Reid explained that because of Frog's strong family backing, there is no fundraising involved, giving it the time to invest in new deals and manage its portfolio. The new fund will split its investments 50/50 between cleantech and the IT and digital media sectors. It is currently working on deals between EUR2m to EUR20m with growth stage companies involved in these areas.

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