UK launches £1 billion fintech fund to compete with Silicon Valley
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.
Justin Tallis | AFP via Getty Images
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.”
A Waymo rider-only robotaxi is seen during a test ride in San Francisco, California, U.S., December 9, 2022.
Paresh Dave | Reuters
Alphabet’s Waymo unit plans on bringing its robotaxi service to Dallas next year, adding to a growing list of prospective U.S. markets for 2026, including Miami and Washington, D.C.
Rental car company Avis Budget Group will be managing the Waymo fleet in Dallas, via a new partnership the companies announced Monday.
Avis CEO Brian Choi said in a statement that the agreement marks a “milestone” for the company, which is now also working to become “a leading provider of fleet management, infrastructure and operations to the broader mobility ecosystem.”
Waymo robotaxi testing is already underway in downtown Dallas involving the company’s Jaguar I-PACE electric vehicles with the Waymo Driver system. That combines automated driving software, sensors and other hardware that power the vehicles’ “level 4,” driverless operations.
Passengers will be able to hail a driverless ride using the Waymo app in Dallas. In some other markets, Waymo only makes its services available through ride-hailing platform Uber.
Waymo has surged ahead in the robotaxi market while other autonomous vehicle developers, including Tesla, Amazon-owned Zoox, and venture-backed startups such as Nuro, May Mobility and Wayve, are working to make autonomous transportation a commercial reality in the U.S.
Waymo says it conducts more than 250,000 paid weekly trips in the markets where it operates commercially, including Atlanta, Austin, Los Angeles, Phoenix and San Francisco.
Waymo’s steepest competition internationally comes from Baidu’s robotaxi venture Apollo Go in China, which is eyeing expansion in Europe.
On Alphabet’s second-quarter earnings call, execs boasted that, “The Waymo Driver has now autonomously driven over 100 million miles on public roads, and the team is testing across more than 10 cities this year, including New York and Philadelphia.”
The business has become significant enough that Alphabet even added a category to its Other Bets revenue description in its latest quarterly filing.
“Revenues from Other Bets are generated primarily from the sale of autonomous transportation services, healthcare-related services and internet services,” the filing said.
The Other Bets segment remains relatively small, however, with revenue coming in at $373 million in the quarter, up from $365 million a year ago. The division still reported a loss of $1.25 billion, widening from $1.13 billion in the second quarter of 2024.
WATCH: Waymo co-CEO on 10 million driverless rides and Tesla’s coming robtaxi challenge
Ray-Ban Meta smart glasses on display in the window of a Ray Ban store in London, UK, on Friday, July 19, 2024.
Bloomberg | Bloomberg | Getty Images
Revenue from sales of Ray-Ban Meta smart glasses more than tripled year over year, EssilorLuxottica revealed Monday as part of the company’s most recent earnings report.
EssilorLuxottica said the success of the Ray-Ban Meta glasses, built via a partnership with the Facebook parent stemming back to 2019, contributed to its first-half overall sales of 14.02 billion euro (US$16.25 billion), which represents a 7.3% year-over-year jump.
“We are leading the transformation of glasses as the next computing platform, one where AI, sensory tech and a data-rich healthcare infrastructure will converge to empower humans and unlock our full potential,” EssilorLuxottica CEO Francesco Milleri and deputy CEO Paul du Saillant said in a joint-statement. “The success of Ray-Ban Meta, the launch of Oakley Meta Performance AI glasses and the positive response to Nuance Audio are major milestones for us in this new frontier.”
In the earnings report, the company said that its new Oakley Meta smart glasses, unveiled in June, represents the latest product line to come from its partnership with the social media company. CNBC reported in June that Meta and Luxottica plan to debut a Prada-branded version of its smart glasses in the future.
Luxottica owns several well-known brands including Ray-Ban, Oakley, Vogue Eyewear and Persol.
In September, Meta renewed a long-term partnership agreement with Luxottica to “collaborate into the next decade to develop multi-generational smart eyewear products,” according to the announcement.
WATCH: Meta’s ambitious AI plans.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike