A new funding vehicle for providing growth-stage capital to UK fintechs has launched with support from Barclays, London Stock Exchange Group, Mastercard, NatWest and Peel Hunt.
The Fintech Growth Fund was envisaged in the Kalifa Review of the UK's fintech ecosystem, which identified a £2bn growth funding gap in the UK.
Aimed predominantly at financial technology companies between Series B and pre-IPO, the first deployment of capital into businesses is scheduled for Q4 2023. The fund will look to undertake, on average, four to eight investments per year, with investments between £10 million and £100 million. The fund will make minority investments and all investments will be for equity and equity-linked securities.
It is believed that the fund is aiming at raising £1 billion from institutional investors to support its mission, with initial seed investments coming from Barclays, London Stock Exchange Group, Mastercard and NatWest to get the new vehical operational
Alongside the investment capital, the FinTech Growth Fund will provide strategic support to its portfolio companies to help them achieve their corporate ambitions, giving them access to relevant experience across fintech, venture capital, and the wider financial services ecosystem.
Peel Hunt, which is acting in an advisory position for the fund, notes that despite the attractiveness of the UK fintech sector, many entrepreneurs prefer to sell rather than to continue to build their companies.
"We believe that we are only in the nascent stages of the fintech revolution, and that over the next decade fintech as a sector will gain a meaningful weight in the FTSE 100," states the firm in a research note. "In our view, FGF’s role should be critical in ensuring that the UK remains the fintech powerhouse in Europe."
The UK FinTech Growth Partners executive team includes Angel Issa, former global head of corporate development & strategic investments at Nomura, Joe Parkin, former head of banks, digital channels and UK Inorganic at BlackRock; Kaushalya Somasundaram, former UK head of payments, partnerships & industry relations at Square and one-time global head of fintech partnerships & strategic innovation investments director at HSBC, and Phil Vidler - CEO of FinTech Alliance.
The fund is currently recruiting for a number of roles, including regional positions as part of its commitment to supporting businesses throughout the UK.
An advisory board, chaired by former Chancellor of the Exchequer, Lord Philip Hammond, will comprise a star panel of fintech founders and City grandees.
Phil Vidler, managing partner, comments: “The UK has always been at the forefront of innovation in fintech but there is a very clear and well evidenced growth funding gap. The FinTech Growth Fund will address the lack of available growth capital by providing a first of its kind domestic, growth-stage, fintech focused venture capital fund backed by strategic investors. Our aim is to not only provide the capital needed for founders to scale their businesses, but to also engage with stakeholders across the nation to support the wider ecosystem. In doing so, we believe we can ensure the UK remains a global leader in fintech.”