Foresight VCT 3 was established in 1995 and Foresight VCT 4 came along in 1998. They have mature portfolios valued at 10-12m but the boards think new money is needed to take advantage of the strong flow of investment opportunities that have been coming their way.
Further investments will provide diversification and the directors also believe now is a good time to invest because valuations are low. Increased liquidity may also follow as larger investments make it easier to actively manage share buybacks.
Foresight Venture Partners, which manages the VCTs was founded in 1984. The will identify suitable investment opportunities through a network of contacts built up over the years.
Members of the team sit on the boards of companies within the portfolios, advising them on mergers and acquisitions, developmenet of the management team and strategic planning. Diversity across industry sub-sectors is regarded as important to reduce sector-specific risk and take into account the business cycle of each sector. Exits are ususally made through sale or stockmarket flotation.
The managers believe technology valuations are more realistic than they were in the late 1990s and that the investment environment has improved since then..
They will be looking for companies that depend on scientific or technological skills, or companies which have a technological advantage. The companies must show they can distinguish themselves from their competitors through factors such an experienced management teams and innovative products The ability of companies to sustain their competitive advantage and their growth prospects will be carefully considered.
The portfolio will be diversified across companies at different stages of development and sectors within the technology field such as IT, communications and manufacturing technology. Although this diversity will help reduce risks, the VCT is still investing in one broad sector which makes it a more specialist, higher-risk investment.
However, as many businesses in all industries are dependent on technology, returns will also be high for investors if the underlying companies grow successfully.