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LEP Small and Medium Enterprise Working Group
Date of meeting:
2 February 2016
Title of report:
London Co-Investment Fund Update
To be presented by:
Mike Brook, SME Working Group Member
Cleared by:
Fiona Fletcher-Smith, Executive Director –
Development, Enterprise and Environment
Classification:
Public
1
Executive Summary
1.1
The London Co-Investment Fund (LCIF), a £25m SME access to finance
scheme, was launched on December 2014.
1.2
The scheme is being delivered by Funding London and Capital Enterprise and
leverages equity funding into early stage growth firms as they emerge from
private accelerators, incubators and support programmes. This report provides
an update on the Fund.
2
Recommendation
2.1
That the LEP notes the update on the London Co-investment Fund.
3
Introduction and Background
3.1
The London Co-investment Fund was launched in December 2014. The fund
is expected to invest in more than 150 early stage businesses and accelerate
the creation of at least 2,600 new jobs in London’s early stage Science, Digital
and Technology businesses over three years to March 2018. The LCIF has
made 39 investments and 3 follow on investment since launching, totalling
£5.1m.
3.2
There is a healthy deal pipeline in place and investments to date have
leveraged an average 4.9 multiple from the private sector, considerably higher
than the anticipated 2.9 multiple.
3.3
Headline achievements include (actuals in bold, targets in brackets):
 Jobs created: 68.5 (19)
 Jobs safeguarded: 51 (14)
 Number of companies invested in: 39 (49)
 Number of follow on investments made: 3 (1)
 Private money leveraged in: £35.1m (£20.8m)
 Co-investment multiple: 4.9x (2.9x)
 850 applications to date through the online portal (n/a)
3.4
The LCIF is being managed by Funding London, is a company limited by
guarantee under the Companies Act 2006. SMEWFL has six members, each
of which may nominate a Director to serve on the company Board. The GLA is
a member of the company and the current nominated Director is Andrew
Collinge, Assistant Director Intelligence. Harvey McGrath chairs the Funding
London Board.
3.5
Co-investment partnering agreements were initially signed with 6 partners,
with further partners added in November 2015 bringing the number to 10.
These include London Business Angels; Crowdcube; Angel Lab; Playfair
Capital; Seedcamp; Forward Partners; Downing LLP; Beacon Capital; Craigie
Capital and Firestartr.
3.6
The fund managers, Funding London, have clarified the investment process
with co-investment partners and have struck a fine balance to ensure sufficient
oversight without direct involvement in due diligence and/or negotiations.
Each co-investment partner’s approach and structure varies slightly but where
possible standardised documents and LCIF specific clauses have been
adopted.
3.7
Investments - the LCIF has made 39 investments and 3 follow on
investments, totalling £5.1m to date. A table listing investments to date, a
short description and the round size are attached in Appendix 1.
3.8
Non-investment targets – the investments to date have leveraged an
average 4.9 co-investment multiple from the private sector, which is ahead of
the LEP’s target of 2.9x. It is in the process of completing eight more
investments, which are expected to be finalised by the end of January 2016.
In addition the fund has created 68 jobs (Q2 2015/16), which is already ahead
of its full year target of 29, which can be read as a reflection on the quality of
investments made to date. The co-investment multiple is also exceeding its
target which suggests the LCIF is having a catalysing effect in attracting
private capital.
3.9
Pipeline - there is a healthy pipeline with over 850 approaches to the LCIF.co
website as at the end of December 2015, resulting in requests of over £100m
in funding. Of these, approximately 50 are considered strong prospects by
Capital Enterprise. In addition to the website, the co-investment partners also
source opportunities through their networks.
4
Equality comments
4.1
None relevant to the recommendations outlined in this report.
5
Risks arising / mitigation
5.1
None relevant to the recommendations in this report.
6
Financial comments of the Executive Director Resources
6.1
There are no financial implications arising from this update.
7
Next steps
7.1
The next steps following consideration by the Panel/Group are summarised
below:
Activity
Progress update to LEP
Appendices:
Appendix 1: Investment Summary
Timeline
Autumn 2016