Posted on 26th July, 2017
Posted on 26th July, 2017
by James Codling
The Time Is Now: Helping scale the UK economy with the London Co-Investment Fund
This week came the exciting news that VentureFounders has been selected to be a partner of the London Co-Investment Fund (LCIF).
Companies now raising capital with VentureFounders will have the opportunity to apply for additional funds through LCIF, providing them with more resources to prove their business models, and put them in a better position for their next funding round.
We join a select group of LCIF partners – from Seedcamp to Forward Partners and The London Business Angels – all of whom want to help bolster funding access for London’s most promising digital, science and technology businesses.
Such a partnership is crucial. Start-up generation across the country is at an all-time high with 650,000 companies created last year, according to Companies House data. Yet as these businesses mature, the capital they need for continued growth is harder to come by. Whilst there is no shortage of cash available for early stage seed and later stage VC companies, it is tougher to find scale-up funding between these two stages.
The benefit to the UK ecosystem of nurturing scale-ups is clear. RBS analysis suggests there is a potential additional 238,000 jobs and £38bn turnover within three years if funding can increase the number of scale-up businesses by 1%. In the past, NESTA has shown that 6% of UK businesses with the highest growth rates generated half of the new jobs created between 2002 and 2008. It is, therefore, scale-ups that offer the greatest source of job and wealth creation potential over the next two decades.
Plugging the funding gap
The amount of money a scale-up needs to raise can be significant at a critical time when the company is trying to fuel its growth. A firm may have received an initial capital contribution to begin operations but this doesn’t last forever. Cashflows can get tight and businesses may not yet be generating the level of revenue it needs to attract institutional investors. With only a few early stage VC firms and an estimated 10,000 scale-ups in the UK, the resulting funding gap becomes critical. Currently, 28% more US early stage companies receive VC investment than those in the UK.
What we’re doing about it
This means all stakeholders – funders, government, and scale-ups themselves – need to come together to support the UK ecosystem.
In less than three years of operation, at VentureFounders we have helped raise over £55m for UK businesses and created a network of engaged investors who continue to support the companies that come to us, forming the strategic partnerships needed to bolster and grow that ecosystem. From Metro Bank to Microsoft Ventures, to Cambridge Capital Group and, now, LCIF, we work with our partners to increase insight and deploy capital. Crucially, we are expanding access to investment for fast growing businesses that need it most, by giving investors access to some of the most exciting opportunities out there.
The government vision of exporting “UK plc” around the globe can only be achieved if the pools of liquidity available to the country’s fastest-growth businesses are increased. The UK has the potential to produce the global tech leaders of the future if the needs of today’s scale-up businesses are better met. VentureFounders is delighted to be growing this effort.