Accelerated Digital Ventures will earmark £150 million for investment into digital startups in 11 cities around the UK identified as “tech hubs”, including Bristol, Cambridge, Glasgow, London, Manchester, Newcastle and Oxford.
The “long-term aim” of the vehicle is to invest “upwards” of £200 million a year into UK-based startups and growth businesses, according to a November 30 statement from its three founding investors – L&G, Woodford and the British Business Bank.
The British Business Bank, set up by former business secretary Vince Cable in 2012, is tasked with providing finance for small and startup businesses around the country. It is providing one-third of the £150 million tech venture funding, with the remainder coming from Woodford and L&G.
Paul Stanworth, managing director of L&G’s proprietary investment arm L&G Capital, said in today’s statement: “The UK has faced chronic underinvestment in physical and digital infrastructure for far too long. If we are to capture and catapult the best of British enterprise more akin to Silicon Valley, we need early-stage capital support.”
The financing challenges faced by small businesses – in the wake of the withdrawal of loans from trouble-hit banks – have lately made their way onto policymakers’ agenda.
In his Autumn Statement on November 23 the UK Chancellor Philip Hammond announced he was beginning a “Patient Capital Review” chaired by Sir Damon Buffini, the former chief executive of private equity group Permira, to investigate the issue.
Woodford is famous for his backing of smaller, often pre-listed venture startups, typically in the biotechnology sector. Since he has become known as a source of capital for such firms, he says, his firm has been deluged with approaches.
The Accelerated Digital Ventures initiative will be led by Sheffield tech entrepreneur Lee Strafford, who founded broadband provider Plusnet. Other staff include executives from UK chipmaker ARM Holdings and Edinburgh-based tech incubator Codebase.
Its vice-president of ecosystem development, Frank DiGiammarino, is a former Amazon executive who was also deputy director of a US government audit programme that reported directly to vice-president Joe Biden.
At L&G, the investment comes amid a large-scale redeployment of the insurance group’s balance sheet capital, led by Stanworth and group chief executive Nigel Wilson, away from investment in government bonds and toward investment in the productive real economy, including housing, infrastructure, and business lending.
Its investment in the digital venture fund accompanies its 40% ownership of small business lender Pemberton, which recently closed its inaugural European Mid-Market Debt Fund at €1.2 billion. L&G also invested £10 million in Cambridge Innovation Capital (CIC), a Cambridge-based investor in technology and healthcare companies, in August.