The Day Tech Investment Changed Forever in the UK

Earlier today, Accelerated Digital Ventures (“ADV”), launched with £150m to invest in innovative digital technology businesses in the UK from entry to exit. For technical reasons, ADV isn’t a fund (see below) but to all intents and purposes it’s an investment platform with value added services at it’s core. Disclosure: I am a formal advisor to ADV.

Elsewhere, others will describe the scope and ambitions of ADV but what will get lost in the announcements is the source (and critical importance) of the private investors behind ADV, what their involvement means for the companies in which ADV will invest; and ultimately the significance for the broader UK (and European) funding ecosystem.

Two of the UK’s most prominent investors, Legal & General (“L&G”) and Woodford Investment Management (“Woodford”) have invested a total of £100m alongside £50m from the British Business Bank (“BBB”) to seed ADV. This stands out because it’s the single largest cheque that the BBB has ever written, and because L&G or Woodford do not invest regularly into venture.

To provide context, Legal & General has a market capitalisation of £13.8bn and is responsible for investing £841.5bn worldwide whilst Woodford, launched in May 2014, already has more than £15bn under management. Both of these investors have access to substantial capital and, in relative terms, their investment is (in my words) the closest thing to an MVP for them to get into early stage startups. It’s my expectation that if ADV delivers upon its promises, it can unlock additional investment not just from these two investment funds but from other significant private and public investors in the UK and elsewhere.

It’s somewhat ironic that VCs who consistently preach to entrepreneurs about innovating around new ways to address markets don’t take their own medicine particularly well and are wedded to a traditional LP funding structure. This approach has its limitations — with the need to raise funds every 3–5 years. It also limits them to private investors rather than public markets.

ADV has moved away from the traditional model to one whereby it’s an investment platform in its own right. The creation of an evergreen investment capability reduces the friction associated with the ongoing need to raise funds from LPs and also (potentially) unlocks public markets in the longer term from which to raise capital.

[Note, this isn’t something new for Woodford who owns 12.4% of the IP Group (an intellectual property business investing in technology companies) that was founded in 2001, listed in 2006 and now has a market capitalisation of over £800m.]

From an ecosystem point of view, ADV’s innovative approach as an investment vehicle (not a fund) allows it to invest into accelerators, incubators and micro funds at scale — something that VC with a typical LP structure struggles to do — but (and more importantly) to provide late stage startups or scaleups and “scale bigs” much needed direct growth investment capital from investors such as L&G and Woodford. They in turn will use ADV to provide genuine insight into their continued investment into digital technology businesses thus creating a true full stack capability for the UK’s tech ecosystem.

All of this wouldn’t have been possible without the hard work and fearlessness of the team behind ADV — who were told it couldn’t happen but have proved otherwise. The team consists of a hugely experienced group of operators and entrepreneurs who want to pay their experience forward. Chaired by Keith Teare (Techcrunch co-founder, RealNames and Archimedes Labs), with Lee Strafford (Plusnet founder and a very good friend) as CEO, the team includes a number of people who have been working at the coalface of digital technology for many years — including Mike Dimelow (previously VP of Corporate Development at ARM), David Fogel (Wayra), Jamie Coleman (co-founder of CodeBase), Andy Mulvenna (co-founder of Brightpearl), Frank Digiammarino (previously with Amazon Web Services’ public sector team), and David Carr (previously of Dotforge and AOL).

As startups delay listing on public markets, and as making significant returns in public markets becomes increasingly difficult, this innovative approach will bridge public market investors with the innovative private side, unlocking or correcting what might be considered a market failure. It’s my hope and expectation that this innovative new approach will be closely watched by private and public investors in the UK and elsewhere.