Tech entrepreneurs launch new fund Clarent

"This is a growing market segment with room for added competition," says Poolman, co-founder of recently launched Clarent Capital PE Fund 1, aimed at making investments of between £2-20m in UK and European media and technology companies. According to Poolman, there is a wealth of venture players looking to fund early-stage technology companies in Europe, but very few growth investors looking to make investments of this size within the TMT sector. "UK and European technology companies are underserved in the growth capital segment, and are often in need of management guidance with an eye towards an exit; many of these companies aren't particularly aware of the exit options available."

Unlike venture players in the technology space, or larger buyouts that commit portions of their funds to the sector, Clarent will stand apart from its peers due to the fund's target of £102m and exclusive dedication to growth capital.

With a background in, and strong preference for, software and coding companies, having once been a code-writer himself, Poolman believes software companies make attractive investments, especially those that have developed their own code, ensuring a level of uniqueness thanks to their intellectual property and in some cases patents. "We will look to invest in companies that have developed patented or patentable IP, that already have a product in market that has generated sales revenues, and are scalable, with a focus on B2B," says Poolman.

To ensure potential investment companies are differentiated from competitors by their intellectual property, Clarent will ensure that software experts are brought in during the due diligence process.

Another key attraction to the software space is the exit market, with major players including Google currently displaying an increasing appetite for unique and forward-looking software companies. Poolman is confident that the fund has the potential to return at least 3-5x. "Pricing for tech companies is favourable. Furthermore, the IPO market appears to be returning as a viable exit option," says Poolman.

Clarent's co-founders Poolman and Mark Beilby set up Lumi Mobile in 2008, a provider of real-time mobile interactive services. The pair began working together when they founded Clarent Capital in 1996 and since then have jointly worked on the production and financing of projects with an aggregate production value of more than $350m. Poolman will actively lead the fundraising effort while Beilby, as co-founding investor, will act as non-executive director.

Last year, Clarent worked alongside Ingenious Media to raise the Ingenious Senior Film Fund, which is now live and investing in independent films that are budgeted between $10-60m.

Clarent is in the earliest stages of its fundraising process having very recently finalised the structure of the fund. The vehicle will employ a typical two and 20 structure, though it will use a deal-by-deal, draw-down approach, so as to avoid sitting on cash and to boost its IRR. The fund's 8% hurdle rate will be achieved by charging investee companies with an annual interest rate of 8% on cash invested.

Clarent will initially target family offices and wealth management groups to raise the bulk of the fund, as well as institutional investors.

Poolman's view on the exit potential of software companies is in line with 2012 divestment activity, which saw 42 exits in the first 11 months of the year; more than double that of the retail sector, according to unquote" data. However, while the volume of software and computer services sales is impressively high, in terms of value, exits in this sector only generated €4bn, while retail divestments reached more than €6bn.

But, the sector has certainly yielded some outsized returns. For example, in 2011, Matrix Private Equity Partners and Foresight Group sold software company App-DNA to US trade player Citrix Systems, generating a whopping 32x.

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