British Growth Fund (BGF) — a £2.5 billion investment company that backs businesses across the UK — decided to allocate £200 million to an early stage venture capital (VC) fund almost exactly a year ago to the day.
Twelve months down the line, and that VC pot (BGF Ventures) has been put to use on no less than nine occasions, backing the likes of food delivery startup Gousto, NHS doctor provider Network Locum, and children’s craft supplier toucanBox along the way.
“I think we’re the second most active venture investor in the UK this year,” said BGF Ventures partner Harry Briggs at British Growth Fund’s new London office.
BGF was set up in 2011 to provide British businesses with the capital that they need to grow. Its shareholders — who pledged £500 million each — are Britain’s five biggest banks: Barclays, Lloyds, Standard Chartered, RBS, and HSBC. The organisation invests between £2 million and £10 million in businesses across Britain with annual revenues over £5 million operating across a variety of industries. It has backed the likes of fitness chain Gymbox and fashion retailer Oliver Sweeney.
The dedicated BGF Ventures fund, on the other hand, is purely for early stage tech companies that generally have smaller revenues than the average BGF-backed company. “Our investment range is £1 million to £6 million,” said Rory Stirling, another one of the BGF Ventures partners. “Our average investment size over the last year has been £3 million, which is bang on what we thought it would be.
“We had a hypothesis when we started that there’d been a lot of change in innovation in new funds at seed and let’s be honest, the reality as to why it hasn’t changed at Series A is it’s really difficult to raise a decent sized fund to have an impact. That’s where partnering with BGF, and the significant resources they have got, is amazing for us because it allows us to shortcut that fundraising process. It gives us a decent amount.”
Veteran VCs Briggs and Stirling launched the BGF Ventures fund with former LoveFilm CEO Simon Calver, who hadn’t made any venture capital investments until almost a year ago when he backed Gousto in what was the first BGF Ventures investment.
“Part of the attraction of coming here, BGF, is this isn’t a fund where we have to raise the next one in four to five years or where we need to give money back to LPs (limited partners) in seven years or so,” said Calver. “So therefore we call it ‘patient capital’. It is in the sense that we’ll back people as long as they need to be backed to be a successful company.”
Other UK tech startups backed by BGF Ventures include in-app ad platform Tapdaq, recruitment platform PeopleGraph, fashion startup Mastered, digital instrument manufacturer Roli, and call centre software provider New Voice Media.
Being a UK-focused venture capital fund, Briggs, Stirling, and Calver want to change the perception that it’s hard to find good tech startups outside of London.
They plan to utilise BGF’s other offices across the UK (Aberdeen, Reading, Bristol, Manchester, Bristol, Leeds, and Edinburgh) to help them find companies beyond London that might fly under the radar of other international VC firms that are focused on Europe’s capital cities.
“London is anything from 65% – 75% of all tech investments,” said Calver. “But I’m speaking to some really interesting companies at the moment in Manchester. I would say the Manchesters and Edinburghs are probably four to five years behind where London would be at the moment in terms of developing their ecosystem.”
The trio admitted that only 25% of its investments (roughly two companies) are based outside London but they expect this figure to change over the next year to reflect increasing number of investments outside London.
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