One of many UK’s main tech buyers has urged pension funds to extend backing for British scale-ups, warning that an excessive amount of of the upside from high-growth companies is flowing abroad.
Saul Klein, co-founder of enterprise capital agency Phoenix Courtroom, mentioned that the UK has change into Europe’s main hub for “thoroughbreds” — fast-growing tech companies with revenues above $100 million — however suffers from a persistent lack of home progress capital.
Based on Dealroom information, the UK now has 191 venture-backed thoroughbreds and greater than 600 firms producing revenues above $25 million. In contrast, solely 20 per cent of the funding for these companies comes from UK buyers, leaving 80 per cent of the returns to abroad backers.
“For over a decade, enterprise capital has been gripped by unicorns,” Klein mentioned, referring to start-ups valued at over $1 billion. “However the true check of an organization shouldn’t be valuation, it’s fundamentals. The UK now has greater than 800 scale-ups producing over £25 million in revenues — greater than France, Germany and the Netherlands mixed — making us second solely to Silicon Valley.”
Firms highlighted as UK thoroughbreds embrace Revolut, Monzo, Tide and Multiverse. In earlier eras, Klein famous, companies comparable to Monzo and Revolut would have already got listed on the general public markets. In the present day, he argued, buyers should view long-term progress because the true benchmark of success.
Europe is estimated to lag the US by $57 billion in later-stage progress funding, based on Dealroom. Klein mentioned UK pension funds had a novel alternative to fill this hole, each to spice up home returns and to construct long-term worth for savers.
Chancellor Rachel Reeves is already making an attempt to encourage pension schemes to put money into non-public firms via her Mansion Home accord. Klein mentioned reforms may unlock as a lot as £200 billion of dedicated capital for scale-ups, with the British Enterprise Financial institution now working at “the dimensions of a sovereign wealth fund”.
“With the chancellor’s reforms, there’s vital upside if native authority funds attain equal ranges of dedication,” Klein mentioned. “But solely 20 per cent of the capital backing UK scale-ups is home. When these companies succeed, 80 per cent of the upside flows abroad to fund pensions and infrastructure overseas.”
Klein, whose agency Phoenix Courtroom backs 54 UK scale-ups, mentioned pension funds ought to see British tech because the engine of jobs, productiveness and progress. “Britain should again the very companies which can be creating jobs, driving productiveness and powering its future,” he mentioned.
The warning comes as Reeves faces strain to steadiness the books with out stifling progress within the autumn funds. For a lot of within the trade, unlocking home capital for UK scale-ups is seen as essential to making sure Britain stays globally aggressive in expertise and innovation.
