British Patient Capital – What, where, why and how?

Featuring Richard Wadman | 13th July, 2018

Last month there were a number of articles in the financial press about the British Patient Capital.

In this blog post, I will be looking at:

  • What it is
  • Where the money came from
  • Why it is thought necessary
  • How a business can access it

What is British Patient Capital?

British Patient Capital is a £2.5bn investment programme administered through a subsidiary of the British Business Bank. “Investing alongside the private sector, British Patient Capital will support £7.5bn of investment for British businesses” and will be developed “with a view to future sale into the private sector with an established portfolio and proven track record”.

In terms of defining patient capital itself, I quite like the quote from Stephen Welton, Chief Executive of BGF:

“…a deep pool of capital isn’t necessarily a patient pool of capital. In business, patience is not only a virtue in a potentially volatile environment – it is vital.  Patient capital exists to help management teams realise the best possible value for their business – and that can take time. That doesn’t mean there’s a conflict between patient capital and exits. Rather patient capital allows management teams to shoot for the right type of exit, at the right time and the right price for the entrepreneur and the economy.”

Where does the money come from?

The £2.5bn will presumably come from UK Government.  The initial seeding for this fund has come from “around £400m of existing and approved venture and growth fund commitments, including a £30m cornerstone investment in venture capital firm Draper Esprit’s £115m capital raise and a £9m investment in the Dementia Discovery Fund – see further below.

Why is British Patient Capital required?

The creation of the £2.5bn programme is one of the key outcomes of the Patient Capital Review. Announced by the Chancellor at Autumn Budget 2017, the programme is an important element of the Government’s Industrial Strategy.  In the words of Keith Morgan, Chief Executive, British Business Bank and Chair of British Patient Capital:  

“A major barrier holding back the continued development of young innovative firms is access to longer-term investment. The lack of this patient capital slows these firms’ growth and holds back the UK’s productivity. British Patient Capital has been created in consultation with Government and the finance community to help ensure that high potential, high growth businesses can access the long-term finance they need to build the UK’s innovation economy.”

From the infographic on the British Business Bank news feed announcing the launch and the ‘about’ page on British Patient Capital website, a large part of the rationale for creation of British Patient Capital is to redress an imbalance in Venture Capital between UK and US.

How does a business access British Patient Capital?

As indicated above, the British Patient Capital programme does not appear to be a direct investor into businesses; rather it will behave similarly to its parent the British Business Bank in being a conduit for UK Government funding into existing funds or as the website puts it:

“British Patient Capital invests in venture and growth capital, capturing value through financing the growth of innovative companies. We focus on investing in both fixed term and evergreen funds and will consider co-investment alongside our portfolio funds.  We only invest in commercially viable funds. Our role is to enable the best managers to effectively execute their planned investment strategy. We achieve that through anchoring, enabling first close, or boosting a fund to achieve optimal size.”

So, funds will be accessible via venture and growth equity funds (and if you are a fund manager for such a fund, then check out the page on the British Patient Capital website that asks for a request for proposals).

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