Venture capital: the great hope for UK growth

It gets behind them not only with successive rounds of funding, but crucially closely engages with them across the gamut of challenges. VC is emerging as one of the pillars of 21st-century growth.

Doubters should look across the Atlantic. The US boasts all the world’s $1tn hi-tech companies, but each was backed and built by VCs using money from pension funds, insurers and university endowments. Responsible for just 0.15% of all US investment, VC has created half its quoted companies. They are at the heart of American business dynamism.

Britain could do the same. We boast the third largest VC industry in the world. Already it has spawned nearly 800 growth companies, with turnover of more than £25m, and more young companies valued at $1bn, so-called “unicorns”, than any country except the US and China. It is starting to give the economy an underlying resilience.

Contrary to popular myth Britain is entrepreneurial – a world leader in startups. We have a strong science base and our pension funds and insurance companies manage £6tn of savings. As a new report – Venture Capital as 21st Century Growth Catalyst – from the Purposeful Company argues (full declaration: I am its co-chair), a national policy priority should be to get behind our venture capital industry.

In particular, VC venture capital should extend its reach beyond London, Oxford and Cambridge and engage with the neglected rest of the country, and involve itself much more in so-called “deeptech” – the next wave of complex technologies after IT and digital platforms.

But there are other worrying realities. British investors may provide 91% of early stage funding, but that drops to 15% as deal sizes grow – with overseas funds, mainly from the US, filling the gap. Without the British Business Bank’s catalytic role, British funding for our young growth companies as they scale up would be paltry.

But scale is a vital precondition to unlocking the capacity to take risks. If it could only venture more, Britain could become Europe’s leading tech and growth economy.

Photograph by Dan Kitwood/Getty Images