Ex-BoS director starts business angel fund

Published on Saturday 10 October 2009 15:07

A FORMER director with Bank of Scotland Corporate has teamed up with serviced office company MWB Business Exchange to create a business incubator fund that will invest in high-growth companies.

Duncan McFadzean, who has persuaded Robert Cook, the chief executive of luxury boutique hotel chains Malmaison and Hotel du Vin, to act as a mentor for potential businesses, has raised 500,000 to invest in up to an initial 20 companies.

The firm, Elixir Incubation, which will be based in Edinburgh, will offer capital, mentoring and serviced office space to small and medium-sized enterprises in a bid to capitalise on the failure of the banks to lend to smaller firms.

McFadzean, a former City-based equity analyst, said the time was right in the economic cycle to get behind small companies and drive them forward.

He said: "There is a huge opportunity for us. A couple of years ago these companies might have gone to banks for funding but now we think it is a fantastic time in the economic cycle to really get behind some small companies and give them a leg up with what we can bring to the table. We have 500,000, so what we are looking at is slightly lower than your average business angel investor.

"It's not massive investment but for the right size of business it could be quite material. We have the office space with Business Exchange, who have 70-plus sites around the country."

In exchange for the investment, Elixir will take an equity stake with a view to exiting between three and five years down the line.

The news comes as it emerged the government is probing Royal Bank of Scotland and Lloyds because it believes they are failing to meet lending targets for small and medium-sized businesses.

Officials believe the banks, in which the government is the biggest shareholder, are pricing loans at artificially high levels.

In March, the banks agreed to lend 39 billion more to companies and customers than they would otherwise have done. The agreement was a condition of their entering the government's asset protection scheme, which insures them against losses from their toxic assets.

The pair admit they are unlikely to meet the two targets for corporate lending: 11bn for Lloyds and 16bn for RBS.