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Strategic report

Fuelling the future of innovation

The UK is recognised globally as one of the leading countries for innovation, with many world‑class universities and a strong track record in science and research. Over a thousand businesses are started in the UK every day, and its smaller business population performs strongly in terms of introducing innovative products, creating jobs and fast growth.

The continued development and rapid growth of innovative UK businesses has the potential to contribute significantly to the success of the country’s economy. Access to sufficient longer-term investment is a key component in enabling such growth.

Our mission

British Patient Capital will unlock more institutional funding so that innovative companies across the UK have access to the long-term patient capital they need to facilitate their rapid development.

Ultimately, our vision is for more home-grown, fully-funded, higher growth companies to emerge as significant players on the global stage.

Accelerating the UK’s market for patient capital

Historically, a lack of patient capital has held back many firms from scaling up, dampening their ambition and preventing them from reaching their full commercial potential. This leads to some firms being sold too early to trade buyers instead of continuing their own positive and sustained development trajectory, meaning they fail to realise their economic promise within the UK.

To develop a business to one of significant value, such as a unicorn, multiple funding rounds and large amounts of equity capital over an extended time period are required. There were 13 unicorns, privately-held VC-backed businesses valued at over $1bn, in the UK at the end of March 2019. As our capital and that of other investors addresses the venture growth capital gap and the venture growth market matures we expect to see more companies achieve unicorn status.

We are here to support ambitious entrepreneurs who want to build world class international businesses.

There are encouraging signs of progress, but challenges remain

The UK equity ecosystem has developed over the last decade and is now better able to support companies at all stages of their development.

  • Since 2016, the UK has been ahead of the US in terms of GDP-weighted VC deal numbers.
  • The UK now has a similar proportion of companies receiving follow on funding at each stage as the US.
  • UK equity investment grew faster than the US in the last 10 years, albeit from a lower base, and the UK currently has a higher ratio of number of VC deals to GDP than the US.

There are some areas, however, where we have the opportunity to tackle relative weaknesses in the UK market for patient capital.

In particular the amount of capital received at each funding round is larger in the US than in the UK – ranging from 1.5x at earlier rounds to 2.4x at the fifth funding round.

This means UK companies receive less funding and so are less capitalised compared to their US counterparts.

Over the next 10 years it is vital that more institutional capital is brought into the venture and venture growth industry to enable long-term investment in innovative companies across the UK.

By addressing and reducing the scale up funding gap, we will enable more capital for businesses at later funding rounds so they can achieve their growth ambitions and boost the UK’s economy.

UK VC backed companies are just as likely to raise follow-on funding as US firms, but less of it

% of companies securing follow on funding
Cohort of companies which raised their first VC round 2011/12

5928 BBB BPC companies securing follow on funding 1

Average deal size by round (£m)
Cohort of companies which raised their first VC round 2011/12

5928 BBB BPC Average deal size by round 1

Source: BBB 2019 Equity Tracker

Case study

Atlantic Bridge – HiLight Semiconductor Ltd

Southampton based HiLight is a “fabless” semiconductor chip company that designs and supplies integrated circuits for use in fibre optic communication systems.

The circuits are designed to help convert communications data from the electrical to optical domain, and vice versa allowing it to be sent at very high rates, or over very long distances, or both, through optical fibres. Applications include supporting internet access, and cellular basestations for mobile phones.

The design and tooling costs for integrated circuits are extremely high, so a low-cost manufacturing process gives the business a competitive edge, allowing HiLight to maintain its advantage.

After going through previous funding rounds, HiLight raised $20m in a Series C funding round, including from British Patient Capital fund manager Atlantic Bridge.

The new funding meant HiLight could substantially expand its lab capability, grow the sales and technical support teams in the UK and key overseas markets, and complete new higher-speed products for datacentre and ‘5G’ cellular rollouts.

Hi Light DSC04130 1

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