The venture capital arm of the state-owned British Business Bank has acquired its first direct stakes in a range of UK start-ups, adding to a growing portfolio of investments made by the government to support businesses during and after the pandemic.
British Patient Capital, which has a budget of Â£ 2.5bn and invests primarily in other venture capital funds, is rolling out a new co-investment strategy in which it will take stakes in growth companies fast.
The group has so far invested in three companies, according to chief executive Judith Hartley, including a Â£ 7million stake in medical technology company Accurx and Â£ 5million each in analytics firm Quantexa data and banking software provider Thought Machine.
Hartley said co-investments will be an increasingly important part of BPC’s strategy to help local and high-growth companies become significant global competitors.
This plan will run alongside the Â£ 375million Future Fund Breakthrough program, launched by Chancellor Rishi Sunak earlier this year and also overseen by the BPC but outside its Â£ 2.5bn budget. He will take stakes in start-up companies that need money for research and development.
The first deal for this program was also announced, with an investment in Ultraleap, which manufactures manual tracking technology that allows users to engage in the digital world without touching surfaces.
Another potentially larger life sciences initiative, overseen by BPC, will invest Â£ 200million in up to four promising start-ups, with Mubadala, an Abu Dhabi-based sovereign wealth fund, pledging to invest. up to Â£ 800million alongside the fund.
The three separate initiatives have been one of the government’s biggest motivations to take stakes in UK companies for decades. Officials say Sunak is keen to support top UK tech companies, both to support their growth against bigger rivals in the US and China and also to potentially profit from the investment. The Chancellor is a former hedge fund executive and Goldman Sachs analyst.
Hartley said the various investment initiatives “fit together”. âThis is something that we are going to be looking to increase during the current fiscal year and beyond,â she said.
“It’s part of the strategy [that companies] can access UK finance and not have to look abroad. The overall goal is to try to create some sort of funding staircase for businesses at different stages of their journey.
The BPC has recruited staff to “bring additional expertise and capacity for these new initiatives that we are bringing to market,” she added.
The government has stakes in more than 150 companies through its original Future Fund program, which was created to help start-ups raise funds during the pandemic. Over 1,100 companies have received convertible loans under this program, which is administered by the British Business Bank.
The group committed Â£ 297million in the year through March 2021, mostly to funds that invest on its behalf, bringing total commitments to almost Â£ 1.3 billion since the inception of the group in 2019 through 51 fund investments.
The number of companies within its underlying portfolio across these funds increased from 503 to 676 over the 12-month period, according to annual results released Thursday,
The group achieved an internal rate of return of 25.3% on its portfolio in its most recent financial year and pre-tax profit of Â£ 184million, which it said was in line with “the exceptional momentum on the larger venture capital market “.