Fintech Growth Fund: The move is also aimed to stem overseas listings by UK fintechs.

The UK has launched a £1 billion fintech investment fund, supported by companies including Mastercard (NYSE: MA), Barclays (LON: BARC), Natwest Group (NYSE: NWG), Peel Hunt (LON: PEEL), and the London Stock Exchange Group (LON: LSEG). The Fintech Growth Fund aims to provide capital to growth-stage financial technology companies that struggle to reach scale and pursue public listings.

This move comes in response to criticisms that the UK imposes barriers on its fintech entrepreneurs, leading them to consider listings overseas. The fund’s creation is a response to the landmark 2021 Kalifa Review examining the attractiveness of the UK’s listings environment for tech firms. The goal is to encourage more fintech companies to remain in the UK for their listings and development, while also providing an opportunity for financial heavyweights to tap into new technology expertise. (CNBC)

Phil Vidler, Managing Partner, observed that the UK had always been at the forefront of innovation in FinTech but there was a very clear and well-evidenced growth funding gap. Notably, the Kalifa Review recognized a yearly shortfall in funding for FinTech companies in their growth stages, approximating £2 billion. To address this gap and uphold the UK’s top-tier ecosystem, the review proposed the creation of a £1 billion growth fund, which would effectively bridge the financial divide.

The FinTech Growth Fund is set to invest in UK-based FinTech companies, primarily focusing on those positioned between Series B and pre-IPO stages. The goal is to support these companies in expanding into internationally recognized and successful organizations. The initial allocation of funds into these businesses is planned for the fourth quarter of 2023, and there is already a robust list of potential investment opportunities in the pipeline. On average, the fund aims to engage in four to eight investment transactions annually, with investment amounts ranging from £10 million to £100 million. The fund’s investments will be in the form of minority stakes, and all financial commitments will be in exchange for equity and equity-linked securities.

Despite recent challenges in the fintech sector, experts see the current moment as opportune for such a fund due to reduced entry barriers for investors and the resilience of stronger business models.

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