www.british-business-bank.co.uk

@britishbbank

High risk investment Funding after Brexit

HEFCE Conference

12th of October 2017

British Business Bank (BBB) is the UK’s domestic development bank

A plc – 100% owned by UK Government

Wholesale –work with 90+

partners

• Established 1st November 2014

• Focused on financial products

• Focused on smaller companies (<250 staff)

• Market led, commercially minded

Increase the supply of equity finance to UK businesses with high

growth potential

Sustain and build the capacity of the VC market

to address the equity financing needs of growing

companies

Increase the economic performance of recipient businesses: employment,

turnover (GVA), productivity, R&D and

innovation, export performance

The BBB supports venture capital and ambitious scale-up businesses

We do this to address a market failure – often due to insufficient scale – and proving that strong returns can be made is key to breaking cycle

5. Poor performance /

insufficient positive exits

3. Small, inefficientfund sizes

1. Low financial returns

2. Investors allocate little to

asset class

4. Fewer, smaller deals leading to under funded

companies

The BBB is already one of the largest investors (LPs) in UK VC today and could be scaled to replace the EIF in the UK

0

200

400

600

W Midland Pension

ATPBBBPFA Pension

EIF

European LPs commitment to VC (2010 - Feb 2017)

0

200

400

600

Local Pensions

PI

W Midland Pension

BBBEIF Temasek

LPs commitment to UK VC (2010 - Feb 2017)

Sum

of

Co

mm

itm

ent

Am

ou

nt

(£m

)

Source: Pitchbook

Sum

of

Co

mm

itm

ent

Am

ou

nt

(£m

)

The BBB’s programmes address multiple parts of the ‘equity gap’…

Value of investment

Angel Co Invest (Individual firms)

Stage of development

Seed Early stage Venture Growth

£100K-£1m

£1m-£5m

£1m-£10m

£5m-30m

Source: Bank analysis. Note: VC Catalyst investments can vary and will allow seed stage investment when other criteria are met

ECF(Funds)

VC Catalyst(Funds)

£150m

£200m

£100m

£80m

£40m

£20m

£10m

£5m

£2.5m

Inve

stm

ent

size

(m

edia

n in

vest

men

t)

Younger

Pre IPO (£200m) PE (£200m)Fu

nd

ing

pro

vid

ers

Grants

Angels

VC funds PE funds

Licencing funds

Older

ECF VCC LMM

Age ofcompany

VC early stage (£2m)VC later stage (£10m)

Lower mid-market (£15m)

Segment in whichBBB operates with live programmes

… and fit within a broader set of funding options for higher risk growth businesses

This approach may not fully address a regional gap in access to equity – working with local institutions such as HEIs could be a way forward

Seed / Early stage investors by region

Sources: 1. ONS (2014 for HGF), 2. Includes London and the South East - ERC (2014 A Nation of Angels) 3. Pitchbook June 2017, this does not take into account the regional offices of London HQ based VC funds- so provides an underestimate of supply of VC in areas outside of London

20%

67% 69%

80%

33% 31%

361100%

Non London

Angels2

403

London

High Growth Firms1

14,190

VC HQs3

• Sustainable risk capital ecosystems need a critical mass of quality deal flow and people within a region

• Universities are regional institutions that could ‘anchor’ people, capabilities, and deal flow

• However, collaboration is key – no single institution can achieve critical mass alone, including the BBB

• Way forward…..?

The copyright in this presentation is held by the British Business Bank plc.

British Business Bank plc is a public limited company registered in England and Wales registration number

08616013, registered office at Foundry House, 3 Millsands, Sheffield, S3 8NH. As the holding company of the

group operating under the trading name of British Business Bank, it is a development bank wholly owned by HM

Government and is not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial

Conduct Authority (FCA). British Business Bank operates under its own trading name through a number of

subsidiaries, one of which is authorised and regulated by the FCA.

British Business Finance Ltd (registration number 09091928), British Business Bank Investments Ltd (registration

number 09091930) and British Business Financial Services Ltd (registration number 09174621) are wholly owned

subsidiaries of British Business Bank plc. These companies are all registered in England and Wales, with their

registered office at Foundry House, 3 Millsands, Sheffield, S3 8NH. They are not authorised or regulated by the

PRA or FCA.

Capital for Enterprise Fund Managers Limited is a wholly owned subsidiary of British Business Bank plc, registered

in England and Wales, registration number 06826072, registered office at Foundry House, 3 Millsands, Sheffield,

S3 8NH. It is authorised and regulated by the FCA (FRN: 496977).

British Business Bank plc and its subsidiary entities are not banking institutions

and do not operate as such.

A complete legal structure chart for British Business Bank plc and its

subsidiaries can be found at www.british-business-bank.co.uk.

BB

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www.british-business-bank.co.uk

@britishbbank