British Business Bank seeds new £2.5bn patient capital investment fund with £400m
The British Business Bank (BBB) has today launched a £2.5bn programme with £400m of seed capital as part of an effort to match the US in creating the next generation of "unicorn" firms.
The newly launched British Patient Capital (BCP) will be a subsidiary of the government-owned BBB, with the aim of providing long-term finance to UK startups trying to grow to billion-dollar valuations and beyond.
BCP will invest alongside private firms, aiming to enable £7.5bn in investment into British firms as part of a plan announced by chancellor Philip Hammond in October.
The fund today announced two new investments. Tech-focused venture capital firm Draper Espirit, a backer of prominent fintech unicorns Transferwise and Revolut, will gain £30m, while the Dementia Discovery Fund will receive £9m.
Keith Morgan, chief executive of the BBB, told Morning Wire the new vehicle will aim to create similar conditions for high-growth companies to the US.
American startups on average garner around three rounds of private investment, compared to around two for the UK. Meanwhile, venture capital money in the US is 98 per cent institutional against only 55 per cent in the UK, Morgan said.
The new vehicle will aim to attract "more investment in high growth potential companies" from institutions in particular by acting as a cornerstone investor.
"Long-term capital is what's needed to bring these companies up to potential," he said.
"The UK has got a pretty good record in creating unicorns, but we can do better."
The long-term plan will eventually see the vehicle go private.
Morgan said he has a positive outlook for the venture capital industry in the short term in spite of deep uncertainty around the Brexit process.
"We've got the same entrepreneurs with the same level of ambition they've always had," he said. "We've got the raw ingredients and now we've got the extra firepower."