IP Group, an intellectual property commercialisation investor, has backed Magnomatics in a deal worth £2.5 million.

Sheffield-based Magnomatics, which was spun out of the city’s university in 2006, produces proprietary magnetic transmissions and compact motors and generators for businesses in the renewable energy, automotive, aerospace and defence sectors.

According to Magnomatics, the cash raised will allow it to continue with the development of its magnetically geared motors.

The fundraising deal sees £1.06 million committed by IP Group, with the amount matched by Finance Yorkshire through its Equity Linked Fund. University commercialisation company Fusion IP will be providing £336,000.

Under the terms of the transaction, a first tranche of investment will see £2.25 million injected into Magnomatics. The remaining £246,000 is dependent on certain milestones being met.

David Baynes, CEO of Fusion, comments, ‘This is a major funding for Magnomatics that will enable them to develop their novel magnetic transmissions and compact, ultra-efficient motors for key vehicle markets.

‘Magnomatics has made major technological advances over the last two years and has an impressive list of development contracts with many of the world’s leading manufacturers.’

In 2008 Magnomatics mraised £500,000 from Fusion IP and White Rose Technology Seedcorn Fund.

Fusion has a co-investment agreement with IP Group, in which IP Group has the right to acquire for cash, 20 per cent of Fusion’s equity in any new portfolio company.

In November 2011, Fusion raised £5 million through a fundraising with existing and new institutional investors. As part of the deal IP Group took an interest of approximately 26 per cent.