The UK has taken a significant step to make the region an investment hub for fintechs by launching a £1 billion FinTech Growth Fund by UK FinTech Growth Partners. This is said to be a first-of-its-kind fund that will focus on supporting growth-stage fintechs as they scale.
Up to £100M for UK fintechs
The FinTech Growth Fund initiative was backed by big names such as Barclays, NatWest, Mastercard, London Stock Exchange Group and Peel Hunt. It will invest in UK fintechs between Series B and pre-IPO, to enable them to scale into global organisations. The first tranche of capital into businesses is scheduled for Q4 2023 with a strong pipeline of opportunities already identified.
It is said that the fund will make four to eight investments per year ranging between £10 million and £100 million. The fund will make minority investments and all investments will be for equity and equity-linked securities.
Besides this, the FinTech Growth Fund will provide strategic support to its portfolio companies, giving them access to an ecosystem of deep, relevant experience across FinTech, venture capital, and the wider financial services ecosystem.
Gautam Pillai, an equity analyst at Peel Hunt, believes the fund is a positive step forward. He told CNBC, “It’s about finding the next Stripe, the next Worldpay, the next Adyen.” The fund aims to identify and support promising FinTech companies that have the potential to become global leaders in the industry.
“There’s still an active investment market in the U.K., we still have one of the world’s leading financial centers — no matter what was assumed would happen in the last 10 years or so,” Phil Vidler, managing director at Fintech Growth Fund, told CNBC.
Why fintech fund?
The UK is already a hotbed of fintech innovation and ranks second only to the US in terms of the scale of its fintech industry. As per CNBC, the UK is home to 16 of the world’s top 200 fintech companies. However, the industry has faced challenges recently, with the valuations of several prominent companies dropping sharply. Notably, the UK fintech investment also plummeted by 57% in the first half of 2023, claims KPMG.
Besides this, the UK has faced criticism that it poses barriers to fintech entrepreneurs, after its exit from the European Union. This fund addresses these concerns and encourages fintechs to float in the UK rather than wait for listings overseas. The London Stock Exchange has already committed to a number of reforms to attract fintech firms to list.
