Star fund manager Neil Woodford claims short-term thinking among British venture capitalists is the reason why the UK has failed to produce tech startups as successful as Facebook or Google.
Woodford, who left Invesco Perpetual in 2014 to set up Woodford Investment Management, told the BBC:
“The limited number of success stories we’ve had here in the UK have generally sold out too early and I think again this comes back to the capital problem. Typically the businesses that have been successful and may have reached a couple of hundred or maybe more market value, they have been under pressure from their shareholders to sell-out.
“That’s principally because of the time constraints on the capital that they have provided to those businesses. So they have been forced to sell-out and haven’t had the choice really to stay domestic if you like and access more capital and become the multibillion-dollar international organisations that they had the potential to become. It’s a capital provision problem.”
Venture capital funds typically have to demonstrate returns to investors who give them money over a seven-year cycle, meaning that startup who have raised money from VCs can come under pressure to sell when the corresponding VC cycle is up.
Woodford told the BBC: “We have been appallingly bad at giving those minnows the long-term capital they need.”
Woodford was at Invesco Perpetual for over 25 years, ending up running two funds worth a combined £23 billion. His Invesco Perpetual High Income fund gained 2,213% in his 25 years at the helm, while the similar Income fund returned 1,839%, according to the Telegraph — both well outperforming the stock market.
Since setting up his own fund, Woodford has continued to have success, with his fund rising by 18% in the first year against a 2% rise in the London Stock Exchange.
Woodford has also begun investing in fintech — financial technology — and was featured on Business Insider’s 40 coolest people in fintech list earlier this year.
Fintech is one of the hottest areas of tech in the UK at the moment and one of the few areas to produce homegrown British unicorns — tech businesses that are still private but worth over $1 billion. The UK’s two fintech unicorns are online money transfer service TransferWise, worth a reported $1.1 billion, and peer-to-peer lending platform Funding Circle, worth $1 billion.
Both have attracted cash from more traditional City investors, alongside venture capitalists: Scottish fund manager Baille Gifford has invested in both and Funding Circle has also been backed by BlackRock and Singaporean wealth fund Temasek.
Woodford’s new fund has taken positions in P2P Global Investments, which invests in peer-to-peer lending platforms, and VPC Specialty Lending, which does something similar. Woodford has also invested in challenger bank Atom, lending platform RateSetter, and crowdfunding platform Seedrs.
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