Brief encounters of a business kind

Small companies and start-ups have taken to 'speed-dating' to attract funds or business partners, reports Mathieu Robbins

As banks rein in lending and erstwhile technology investors struggle to find cash in the wake of the economic meltdown of the past two years, small companies are having to use increasingly desperate measures to get funding. The normally subdued halls of the Institute of Chartered Accountants were buzzing earlier this autumn, as a plethora of such companies resorted to speed-dating in a bid to get the funds or business development partners that would allow them to chase their dreams.

The event held in September was part of the second annual competition organised by the London Technology Fund, a government-backed fund that co-invests – meaning it can only invest along with private sector partners – in start-ups.

"Young companies in the tech sector and start-ups do not have a cash flow to sustain debt, even as borrowing becomes even harder," said David McMeekin, the former City banker who chairs the fund. "There were also a number of groups like venture capitalists and business angels that have now got less spare cash to invest – so there are very few places [for start-ups seeking funding] to go." The competition would unfortunately also help to give some of the less successful start-ups "a cold dose of reality", he said.

Many key venture capital funds had not raised cash for several years going into the recession, according to Michael James, founder of Fertility Focus, which hopes to create a new treatment for infertility and was one of the companies taking part in the competition. "There has been a total drying up of venture capital in the last couple of years, and many a good start-up in healthcare has gone under." James estimates it is likely to take another two years for traditional VCs to return to the fray.

One hundred and fifty companies started the competition in May, and around 30 companies were selected to go through in July. The overall winner and recipient of the grand prix was Trojantec, which also won the life sciences sector award. Trojantec is developing cancer stem cell therapeutics. Investments in other companies were, and could be, made.

The 31 hopeful entrepreneurs were joined at the speed-dating event by potential investors, including the venture capital, business development and research arms of large corporations, such as BAe, BP, BT, Motorola, Oracle and Royal Bank of Scotland. The logic is simple for them – funding a company with a good idea already partly developed is easier and often cheaper than developing the product themselves. "Our products and services require the integration of a vast array of technologies and the need to innovate is relentless," said Glenn Gapper, industrial technology acquisition manager for BAe. "We are therefore constantly on the lookout for collaborators large and small, well-established and young, who can help us meet the demanding challenges in our markets."

About 160 "brief encounters" took place during the day, punctuated by a whistle blown every 10 minutes by McMeekin, who said about 60 additional meetings were requested by investors with start-ups they had met on the day. "There can only be one winner in the sector, but if a leading academic or a company can take the company that, say, came third away and speak to them later, then it's a great help," he said.

There were many companies with new ideas, but few as quirky as that proposed by Italo-American couple Ryan Genz and Francesca Rosella, who have set up Cute Circuit. Genz has a degree in anthropology and taught interface design at Apple, while Rosella is an Italian who has designed products for fashion brands such as Valentino and Esprit. They met at a design school near Turin in Italy, and make clothes that allow people to interact at a distance, in ways that include hugging each other. The shirts use Bluetooth technology to connect through a mobile-phone network with other people wearing similar shirts.

Rosella says that the idea has sparked interest in London and the US, which is one of the reasons the couple moved to the UK. Initial attempts to market the product in Italy in 2005 were "disastrous", Rosella added, saying that Italy is too conservative, traditional and "male" for her liking.

Those who aren't successful in the competition can at least cling to the hope that it has given them that vital connection or training session that will allow them to stay alive.