The U.K. has faced criticisms from some in the industry that it is posing barriers to its fintech entrepreneurs and forcing them to consider listings overseas.
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The U.K. has created an investment vehicle to back growth-stage financial technology companies until they can go public, in a bid to bolster Britain’s global image as a fintech investment hub.
Backed by the likes of Mastercard, Barclays and the London Stock Exchange Group, the Fintech Growth Fund aims to invest between £10 million to £100 million into fintech companies, ranging from consumer-focused challenger banks and payments tech groups to financial infrastructure and regulatory technology.
The fund, which is being advised by U.K. investment bank Peel Hunt, looks to support companies at the growth stage of their funding cycle, as they seek Series C rounds and above.
The venture was created in response to a 2021 government-commissioned review helmed by former Worldpay Vice Chairman Ron Kalifa and examined whether the U.K.’s listings environment is unattractive for tech firms.
“It’s definitely a start,” Gautam Pillai, an equity analyst at Peel Hunt covering fintech, told CNBC in an interview Wednesday.
It marks a rare commitment to a specialized fund focused on fintech backed by mega-industry players. While fintech-focused funds like Augmentum Fintech and Anthemis Group exist, the U.K. has yet to see a fintech-oriented fund that came about from a government-led strategy.
Britain has faced some industry criticisms that it poses barriers to fintech entrepreneurs and forces them to consider listings overseas — particularly after the country’s exit from the European Union, which has cast some shadow over the U.K.’s status as a global financial center.
The London Stock Exchange has committed to a number of reforms to encourage fintech firms to float in the U.K. rather than in the U.S. — a particularly pressing step, following British chip design firm Arm’s decision to ditch a London listing for New York.
“It’s about finding the next Stripe, the next Worldpay, the next Adyen,” Pillai said.
The fund also counts Philip Hammond, the former U.K. finance minister, as an advisor.
The move could also be an opportunity for financial heavyweights to access to expertise in the development of new technologies. Big banks and financial institutions are trying to advance their own digital ambitions, as they face competition from younger tech upstarts.
The aim is for the Fintech Growth Fund to make its first investment by the end of the year, Pillai said.
While £1 billion pales in comparison to some of the huge sums being deployed in fintech and tech more broadly, Pillai said it’s “definitely a start.”
The U.K. is a hotbed of fintech innovation, only behind the U.S. when it comes to the scale of its fintech industry, he added. The U.K. is home to 16 of the world’s top 200 fintech companies, according to an analysis from independent research firm Statista conducted for CNBC.
The fintech industry is facing a period of turbulence, as rising inflation and macroeconomic weakness soften consumer spending. The valuations of companies such as Checkout.com, Revolut and Freetrade have dropped sharply in recent months.
Last year, the internal valuation of Checkout.com plunged by 73% to $11 billion in a stock options transfer deal.
Revolut, the British foreign exchange services giant, suffered a 46% valuation cut — implying a $15 billion markdown — by shareholder Schroders Capital, according to a filing. Atom Bank, a U.K. challenger bank, meanwhile had its valuation marked down 31% by Schroders.
U.K. fintech investment plummeted by 57% in the first half of 2023, according to KPMG.
Pillai said now is the right time to start a new fintech fund, as the entry level for investors to take positions in privately-held mature companies has been reduced heavily.
“From a pure investment standpoint, you couldn’t find a better time in fintech history to start a fintech fund.”
While 2020 and 2021 experienced a “bubble” of sky-high valuations in the tech sector, Pillai believes this correction “killed some very weak business models butt the stronger business models will survive and thrive.”
“There’s still an active investment market in the U.K., we still have one of the world’s leading financial centers — no matter what was assumed would happen in the last 10 years or so,” Phil Vidler, managing director at Fintech Growth Fund, told CNBC in an interview.
“A center for business — time, location and law, etc. — those fundamentals are still here, and similarly we’re now getting to a point where second-time founders are starting companies, and large, global venture firms touted as the best in the world are setting up here in the U.K.”
Liz Reid, vice president, search, Google speaks during an event in New Delhi on December 19, 2022.
Sajjad Hussain | AFP | Getty Images
Testimony in Google‘s antitrust search remedies trial that wrapped hearings Friday shows how the company is calculating possible changes proposed by the Department of Justice.
Google head of search Liz Reid testified in court Tuesday that the company would need to divert between 1,000 and 2,000 employees, roughly 20% of Google’s search organization, to carry out some of the proposed remedies, a source with knowledge of the proceedings confirmed.
The testimony comes during the final days of the remedies trial, which will determine what penalties should be taken against Google after a judge last year ruled the company has held an illegal monopoly in its core market of internet search.
The DOJ, which filed the original antitrust suit and proposed remedies, asked the judge to force Google to share its data used for generating search results, such as click data. It also asked for the company to remove the use of “compelled syndication,” which refers to the practice of making certain deals with companies to ensure its search engine remains the default choice in browsers and smartphones.
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The DOJ also proposed the company divest its Chrome browser but that was not included in Reid’s initial calculation, the source confirmed.
Reid on Tuesday said Google’s proprietary “Knowledge Graph” database, which it uses to surface search results, contains more than 500 billion facts, according to the source, and that Google has invested more than $20 billion in engineering costs and content acquisition over more than a decade.
“People ask Google questions they wouldn’t ask anyone else,” she said, according to the source.
Reid echoed Google’s argument that sharing its data would create privacy risks, the source confirmed.
Closing arguments for the search remedies trial will take place May 29th and 30th, followed by the judge’s decision expected in August.
The company faces a separate remedies trial for its advertising tech business, which is scheduled to begin Sept. 22.
From left, Parker Conrad, co-founder and CEO of Rippling, and Kleiner Perkins investor Ilya Fushman speak at the venture firm’s Fellows Founders Summit in San Francisco in September 2022.
Rippling
Human resources software startup Rippling said Friday that its valuation has swelled to $16.8 billion in its latest fundraising round.
The company raised $450 million in the round, and has committed to buying an additional $200 million worth of shares from current and previous employees. The company’s valuation is up from $13.5 billion in a round a year ago.
Rippling said there was no lead investor. Baillie Gifford, Elad Gil, Goldman Sachs Growth and others participated in the round, according to a statement from the San Francisco-based company.
With the tech IPO market mostly dormant over the past three-plus years, and President Donald Trump’s new tariffs on imports leading several companies to delay planned offerings, the most high-profile late-stage tech startups continue to tap private markets for growth capital. Rippling co-founder and CEO Parker Conrad told CNBC in an interview the the company isn’t planning for an IPO in the near future.
Conrad also highlighted a change that’s taken place in public markets in recent years, since inflation began soaring in late 2021, followed by higher interest rates. With concerns about the economy swirling, many tech companies downsized and took other steps toward generating and preserving cash.
“It does look a lot like, in order to be successful in the public markets, your growth rates have to come down so that you can be profitable,” said Conrad, who avoided enacting layoffs. “And so for us, that sort of pushes things out until the company looks profitable and probably slower growing, right?”
At Rippling, annual revenue growth is well over 30%, Conrad said, though he didn’t provide an updated sales figure. The information reported last year that Rippling doubled annual recurring revenue to over $350 million by the end of 2023 from a year prior.
Given the pace of expansion, Conrad said he isn’t fixated on profits at the moment at Rippling, which ranked 14th on CNBC’s Disruptor 50 list.
Rippling offers payroll services, device management and corporate credit cards, among other products. Competitors include ADP, Paychex, Paycom Software and Paylocity.
There’s also privately held Deel, which Rippling sued in March for allegedly deploying a spy who collected confidential information. Conrad suggested that the publicity surrounding the case may be boosting business.
“I think it’s too early to say, looking at the data, how all of this is going to evolve from a market perspective, but certainly we see some companies that have said, ‘Hey, we’re talking to Rippling because of this,'” Conrad said.
Fortnite was booted from iPhones and Apple’s App Store in 2020, after Epic Games updated its software to link out to the company’s website and avoid Apple’s commissions. The move drew Apple’s anger, and kicked off a legal battle that has lasted for years.
Last month’s ruling, a victory for Epic Games, said that Apple was not allowed to charge a commission on link-outs or dictate if the links look like buttons, paving the way for Fortnite’s return.
Apple could still reject Fortnite’s submission. An Apple representative didn’t respond to a request for comment. Apple is appealing last month’s contempt ruling.
The announcement by Epic Games is the latest salvo in the battle between it and Apple, which has taken place in courts and with regulators around the world since 2020. Epic Games also sued Google, which operates the Play Store for Android phones.
Last month’s ruling has already shifted the economics of app development for iPhones.
Apple takes between 15% and 30% of purchases made using its in-app payment system. Linking to the web avoids those fees. Apple briefly allowed link-outs under its system but would charge a 27% commission, before last month’s ruling.
Developers including Amazon and Spotify have already updated their apps to avoid Apple’s commissions and direct customers to their own websites for payment.
Before last month, Amazon’s Kindle app told users they could not purchase a book in the iPhone app. After a recent update, the app now shows an orange “Get Book” button that links to Amazon’s website.
Fortnite has been available for iPhones in Europe since last year, through Epic Games’ store. Third-party app stores are allowed in Europe under the Digital Markets Act. Users have also been able to play Fortnite on iPhones and iPad through cloud gaming services.