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UK manufacturer woos reluctant VCs

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“I’ll start at the beginning,” he says. “I was running the R&D department for a company which was bought up by a big US corporation. The parent company decided they didn’t need a UK-based R&D team and told me to fire all my staff. I thought, ‘No way!’ So I took my ten-strong team, bought a shell company for £100 and launched a start-up.”

DeepStream Technologies specialises in clever circuitry. Rather than being confined to a flat circuit board, the firm designs 3D electronics in all shapes and sizes to squeeze into unusual spaces. It’s extremely niche, but very lucrative. However, like all manufacturing businesses, Crosier needed a substantial start up fund to get the company off the ground.

Luckily, Crosier chose to found the company in Bangor, Wales. The Welsh Assembly, eager to foster knowledge-based businesses in the area, gave him a £1.2m grant on the condition that they employ 60 people.

DeepStream obliged. But it was only half way there. In June 2003, armed with little more than a Powerpoint presentation, Crosier pitched to nearly 100 VCs. But the investment climate was terrible. “Once they heard the word ‘manufacturing’, many VCs were straight out the door,” says Crosier. “They didn’t want their money tied up in assets. It’s almost impossible to get out again.”

To soothe the flapping investors, Croiser came up with an innovative business model which used bank debt to finance all fixed assets, and private equity to fund the IP. This model worked a treat. And on this basis, Crosier secured £2.8m from Doughty Hanson by the end of the summer.

Crosier did have to give up just under 50 per cent of the company, but DeepStream was the one and only manufacturing firm to get investment in the UK that year. Quite a coup.

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