European firm turns to US for capital

Date: 01/08/1996

WHEN Robert Madge decided to take the plunge and mortgage his stud farm to finance the creation of a UK high-tech company ten years ago, little did he realise that his main backers would be American.

Madge had been writing software for video games and had the idea of making a product to help personal computers talk to each other.

In 1986, he founded Madge Networks BV and started to produce printed circuit cards which could be fitted into the back of PCs, allowing them to share data.

As the company's ambitions grew and Madge set his sights on becoming a manufacturer of networking systems, he kept running into a glass ceiling.

“It is a European company,” says Madge's European marketing director Mike Beadsmoore. “But if you look at the networking market and the venture capitalists at the end of the Eighties, they were not prepared to invest in something they could not understand.

“Venture capitalists in the US have specialists who understand these markets. Since we are unusual in our market in being Europe-based, it was easier to list on the NASDAQ.”

Madge did just that and raised 1.3 billion ecu. As a result, the firm has become a major player in a market previously dominated by the US and has been able to expand through acquisitions in Israel and Europe.

“European investors did not invest in high-tech start-ups because, traditionally, there had not been a lot of them here,” says Beadsmoore.