DeepStream Fundraising

Background

When the company that Mark Crosier and his four colleagues worked for was taken over by a US corporation who closed their R&D department, the team of four faced a bleak future. They either had to disband and go their separate ways or invest their redundancy payments to start up in business for themselves. It was time for a leap of faith and a decision that led them to establish DeepStream Technologies. It was a tough decision, they all had wives and children to support and mortgages to pay, but they also knew that they had a superb team, great market knowledge and expertise, as well as some truly innovative new product ideas.  The challenge was palpable, but could they secure sufficient financial backing to make it work?

ICON’s role

“Having made the decision to go it alone, we knew that we would require significant investment and probably from more than one source. To understand our options as a start-up and where to start looking for funding was the first major hurdle.

As if funding for a start-up wasn’t going to be difficult enough, we also decided to set up a fully-automated manufacturing base in the UK to protect our IPR, rather than attempt a complex sub-contract or outsourced operation.  This was going to make for an interesting few months.

We met with ICON Corporate Finance, who worked with us to explore what our funding requirements and strategic options were. We then set about developing a plan appropriate for the venture capital community not only outlining our strategic direction, but also addressing the key issues that potential investors would focus on. James helped us hone this and he ensured we told a compelling investment story.  He then worked hard to identify and secure us meetings with a selection of highly qualified and experienced investors who understood our sector and soon a consortium of interested parties began to take shape.

Result

We were introduced to Doughty Hanson Technology Ventures and HSBC Technology Banking and progress came rapidly. We eventually closed on a round of funding which would see both parties committing funds up to £10 million alongside a substantial RSA grant.

What made the difference to successful fundraising was being able to speak with investors with relevant experience. We didn’t have the luxury of trying to educate our audience and accessing the most appropriate contacts quickly was vital.

Being an engineer by profession, it pains me to admit what became blindingly apparent, that investing is not all about the technology! Having the best technology in the world is worthless unless you are unable to sell it. Venture capitalists want to understand how you can develop and grow a great company rather than the underlying technology and, as such, your commercial strategy is paramount. Who are your customers? What are your strategic relationships? What sales channel strategy will you adopt? Who will compete with you? And, how will you defend yourselves?  If you don’t know your markets and how you will penetrate or grow them, how can you expect someone else to back you?”.

Post-Investment

DeepStream Technologies is now one of the UK’s fastest growing companies and certainly one of the most important domestic manufacturing start-ups in recent years. Within a year of completing funding the company secured contracts worth in excess of £10 million and had grown rapidly to a team of 30.  During 2006, Deepstream once again turned to ICON to help them with their Series B investment and successfully closed on a £12.3million round of investment, with 3i being introduced as a new investor alongside Doughty Hanson Technology Ventures. Deepstream has continued its upward trajectory, winning more customer orders and now employs in excess of 60 people, principally in good quality engineering jobs. The Company has also won the high accolade of “Start up of the Year” at the 2006 Elektra European Electronics Conference and more recently, Deepstream was chosen as one of only 47 companies globally to attend the 2007 World Economic Forum at Davos, Switzerland as a World Technology Pioneer.

VC Comment

Nigel Grierson, Managing Director, Doughty Hanson Technology Ventures:

“When I am reviewing an investment I am looking for three things: 1. Is the company run by an outstanding management team? 2. Is the product or service addressing a big market segment? 3. Does the product or service have potential to attain a leadership position in that segment?

Technology businesses will always have to navigate unknown and uncharted territory as they develop. Pretending they know this is the right market segment and the right technology for the next five years is a little like crystal-ball gazing.  However, a talented management team that thinks like a business, will know how to overcome hurdles and is more likely to succeed in business.

When I met the DeepStream founders, it was clear that this was a team that not only had all the technical skills and knowledge to execute its plan, but also had the passion and commitment to succeed.  This was a team that was thinking like a business as well as thinking like engineers.

Today, the team has delivered to its plan and is clearly excited at what it has achieved and what is ahead.  I am excited too – they have a real focus on increasing shareholder value in their business.”

WWW.DEEPSTREAM.COM