Any dialog centered on the U.Okay. tech scene usually has a robust middle of gravity across the south of the nation — to many, “the U.Okay.” and “London” could as effectively be the identical factor.
A current Home of Commons Committee report on enterprise capital allocation pointed to “uneven ranges of VC funding” throughout the U.Okay., with the so-called “golden triangle” of London, Oxford and Cambridge attracting some 80 p.c of the nation’s complete funding. The lion’s share — round 70 p.c of the overall — is poured into the Higher London area, as per Dealroom information.
And that is one thing Edinburgh-based VC agency Par Fairness is in search of to deal with, with a brand new £100 million fund concentrating on early-stage startups within the north.
‘Smart valuations’
Whereas the fabled histories of Cambridge and Oxford entice a few of the world’s best minds, and the close by capital London serving as a perennial draw for high expertise by way of the likes of UCL and Imperial School, the remainder of the U.Okay. isn’t precisely missing in relation to tutorial credentials both — whether or not it’s by the so-called “pink brick” universities of Manchester, Sheffield, Liverpool, and Leeds, or additional north in locations akin to Edinburgh the place greats akin to Charles Darwin and Alexander Graham Bell studied.
Throw into the combination the power to garner extra favorable phrases away from the buzzy south, and it’s simple to see why an investor may be tempted to put their concentrate on locales additional afield.
“Within the north of the U.Okay. we’ve got a mixture of a wealthy manufacturing and engineering heritage coupled with tutorial establishments with world class R&D departments that are producing expertise and innovation, accessible at wise valuations,” Paul Munn, Par Fairness managing associate advised TechCrunch. “In 2022, we backed a sophisticated supplies enterprise at one sixth of the valuation of its high-profile competitor primarily based within the ‘golden triangle,’ which raised £60 million with an inferior product. Quick-forward 18 months, and key members of employees are leaving this competitor and in search of to affix our portfolio firm.”
Par Fairness group in Edinburgh Picture Credit: Par Fairness
The story to date
Par Fairness’s roots might be traced again to 2008, beginning with an inaugural “innovation fund” constituting £4.8 million in angel capital. It adopted this up in 2012 with a £40 million EIS (enterprise funding scheme) fund, which is principally a tax-efficient funding initiative aimed toward high-net-worth people.
Along with this, Par Fairness has additionally been deploying capital raised by way of its Par Investor Community angel group, British Enterprise Funding’s (BBI) Regional Angel Program, and the Scottish Authorities’s innovation-focused funding physique Scottish Enterprise. In complete, Par Fairness has deployed some £167 million in capital to this point, incorporating 78 startups and 423 particular person transactions together with follow-on investments.
In the present day’s announcement is all about Par Fairness’s first ever institutional VC fund, dubbed Par Fairness Ventures I LP, with Scottish Nationwide Funding Financial institution and BBI spearheading the majority of the fund’s capital, with extra enter from the Strathclyde Pension Fund.
Whereas Par Fairness is concentrating on £100 million in complete, its first shut sits at £67 million, and can be aimed toward tech firms with “high-growth potential” throughout the north of the U.Okay., significantly companies with robust IP. Particularly, Par Fairness can be local weather tech, industrial tech, and well being tech, with the latter class serving up a profitable exit for Par Fairness when Greatest Purchase acquired its Edinburgh-based portfolio firm Present Well being for $400 million in 2021.
Now, the funding boundaries could blur considerably as there isn’t a straight line that divides the north and south. However for the needs of its investments, Par Fairness will concentrate on the Midlands up, which clearly contains Scotland and Northern Eire throughout the water. And whereas the fund can be managed from Par Fairness’s central Edinburgh workplace, it additionally lately opened hubs in Leeds and Sheffield which can act in a assist capability.
Traditionally, the South — and London specifically — have at all times been large attracts for budding startup founders, due for probably the most half to the supply of capital and expertise. Nonetheless, the remote-work revolution spurred by the worldwide pandemic, coupled with the macro financial setting, may very well be encouraging founders to rethink the place they name house. And because of this now may very well be time to double-down on investments throughout the entire of the U.Okay.
“We now have half of the U.Okay.’s finest universities within the north, lots of that are ranked world class in inside their science, expertise and engineering departments,” Munn stated. “Sadly, over the past 15 years, we’ve seen a relentless drain of firms and expertise leaving the north of the U.Okay. for London. There’s no denying the capital’s magnetic draw, nonetheless since Covid, and with the rise within the cost-of-living, we’re seeing extra graduates keep within the areas than ever earlier than.”
