New $1bn government-backed investment fund hopes to create unicorns post-Brexit
The National Investment Fund will seek to replicate funding UK businesses currently receive from the EU-backed European Investment Fund
A new $1bn government-backed investment fund that hopes to create UK unicorns post-Brexit has been announced.
The National Investment Fund will seek to bridge a “a £4bn funding gap between American firms and British firms”, and ensure UK start-ups have enough access to finance to achieve unicorn status – where a start-up becomes valued at $1bn or more.
The initiative will seek to replicate and replace the European Investment Fund – which will become inaccessible to British businesses once the UK officially leaves the European Union.
Part of the Treasury’s Patient Capital Review, a consultation has been set up to seek views on how to increase the supply of capital to scale-ups.
The consultation will look at how businesses could potentially benefit from investment originating from pension funds, and how to commercialise research from UK universities and drive investment in firms across the UK.
The National Investment Fund could be set up as a public-private partnership or be run solely by the government – and then sold off once it has established a sufficient track record.
Currently, fewer than one in 10 UK businesses firms that raise seed funding go on to get fourth round investment, such as a Series C round, compared to nearly a quarter of businesses in the US.
In a European context, the UK is the outright leader in terms of the creation of unicorns – though it still lags significantly behind the US which accounts for 54% of all start-ups who have smashed the $1bn mark.
China currently claims 23% of all unicorns, with just 4% UK-based.
With regards age, Uncle Sam’s start-ups are also a little younger than those closer to home, suggesting US initiatives are more effective at turning new businesses in large scale firms.
10 of the UK’s largest 100 listed firms were created after 1975 compared to 19 in the US but only two in Europe.
Phillip Hammond, chancellor of the exchequer, said:
“Britain is an innovation powerhouse and it’s vital that we make sure our cutting-edge firms have the funding they need to meet their potential and conquer new markets.
“Meeting this challenge will boost our productivity and enable us to create more well paid jobs across the UK.”
Sir Damon Buffini, governor at the Wellcome Trust and chair of the panel, said:
“Since the prime minister launched this review, our panel of experts have worked hard to get to the core of the challenges and look forward to making recommendations for how we can act now to capitalise on the tremendous pipeline of UK scale ups and maximise the potential of British innovation.”