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Thursday, 24 February, 2000, 16:02 GMT
UK flush with internet cash


The fund targets start-up companies across Europe


The UK is suddenly flush with internet funds.

The latest one, Internet Incubator, was launched on Thursday, offering start-up companies not just cash but also support services.

It enters a crowded market.

Internet investment companies, such as JellyWorks, Internet Indirect and Convergence have listed on the Alternative Investment Market(AIM).

But sceptics are already sounding notes of caution about the bumper valuations some of these companies have received.

Incubating money

Internet Incubator, with 12m in its fund, plans to build internet start-up companies across Europe.

It will focus on three kinds of companies. These are companies that build the blocks of internet commerce, business-to-business companies and mobile commerce.

Already it is looking at 34 deals across Europe, many of which are from the UK, chief executive Nigel Drummond said.

Its 240 investors were chosen because they can offer expertise as well as cash, he said.

Mr Drummond said: "Our collective experience in the internet arena shows that getting access to to funds is only part of the equation... dot com companies want help with specific skills - from marketing through to business strategy. "

Its management team includes chairman Philip Crawford, also president of EDS International.

Non-executive directors include Nigel Robertson, founder of Scoot.com.

It is backed by investment banks which include ING Barings, Babcock and senior executives of Societe Generale.

Going public?

Internet Incubator says it may need to raise money by the summer.

"That may be through going public or through a private round with investors," Mr Drummond said.

There is certainly demand for such funds' stock from investors who see them as an indirect way to get stakes in the smaller internet related companies which may one day become the next Microsoft - or Amazon.

JellyWorks recorded a 2000% rise in its share price three days after floating.

But critics say some of these funds lack experienced management and a diversified stock mix. Often they have floated before making any substantial investment, yet still receive bumper valuations.

"You have to worry about whether the smaller funds will stick around if internet stocks go into a protracted downturn,'' one analyst said.

The London Stock Exchange has already warned City stockbrokers of their legal responsibility to ensure internet companies are fit to be quoted, some reports said.

"People are sensible to be cautious," Internet Incubator's Nigel Drummond said.

But he added: "The reality is there is a real opportunity there."

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See also:
23 Dec 99 |  Business
Jelly Works rapid rise
29 Nov 99 |  Business
E-business: opportunity or peril?
24 Dec 99 |  Business
1999: the year of the net

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