The European Investment Fund (EIF) is one of the biggest sources of capital for European funds, having committed to more than 680 over the years, per PitchBook data.
Since the Brexit referendum in 2016, the EIF has significantly reduced the number of UK-focused funds it commits to. The European Investment Fund’s annual report for 2017 showed that it backed only three UK venture funds that year, compared to 20 in 2016.
Now, with the latest Brexit deal failing in Britain’s Parliament just 17 days before the scheduled exit, the future remains unclear. And with more questions than answers, local institutions are looking for ways to provide solutions.
With the possibility of losing EIF funding altogether, the UK’s British Business Bank (BBB) has stepped in to try and fill the funding gap, which could prove to be a challenging task, to say the least. To support this effort, the BBB announced the setting up of a £2.5 billion capital pool for venture firms.
For venture capital, which is already considered to be a “high-risk” industry, the ongoing political and economic uncertainty is a reminder that market shifts can happen quickly—and the ability to adapt is key.
To that end, how can venture capitalists across the UK identify alternative sources of capital?
Accessing institutional investors beyond the EIF and BBB
To identify new sources of funding, venture capitalists can look at which institutional investors have previously committed to venture capital funds in the UK. (If they have done it in the past, they are more likely to do it again.)
In addition, venture capitalists can look at which investors have an active mandate to commit to—or stated preferences for—funds similar to theirs. This helps VCs narrow their focus and only spend time reaching out to the most promising investors while they raise a fund.
Instead of competing for funding from large investors, it may also be worth exploring less traditional sources of capital such as family offices, international corporations and wealth management funds that want to invest in European companies, but may not have the expertise.
With PitchBook, venture capitalists can search for limited partners based on their commitments, allocations and mandates to find the investors most likely to commit to their funds.
Learn more about our limited partner data.