By Catherine Lewis La Torre, CEO, British Business Bank Investments
British Business Investments is the commercial arm of the British Business Bank. We were established to help improve the financing options available for small and medium-sized enterprises (SMEs).
We work with and through a large number of financial partners that are experienced in delivering innovative financing products directly to companies. We seek to invest in partners and strategies which allow us to meet our strategic objectives whilst at the same time achieving a commercial return for our Shareholder.
Our aim is to increase the diversity of finance for SMEs through both equity and debt instruments. We focus specifically on investing in innovative companies through our VC Catalyst programme. This has £400 million available to invest venture capital funds. We have already committed to invest circa £100 million in ten different venture capital funds.
What do you look for when identifying emerging companies and technologies?
The venture capital funds that we invest in will, between them, cover a broad range of investment strategies, especially in terms of the sectors covered. We would look to build a broad portfolio with companies active across IT and Biotech. These venture capital funds will also engage with innovative companies at different stages of their development and, across the portfolio of funds we are providing seed, start-up and scale-up capital.
Where do you see key growth and expansion opportunities for the financial sector?
By virtue of our size and mandate we are able to target our support towards Partners that have innovative or disruptive business models. As an example we have been early supporters of Peer-to-Peer platforms and we now have a number of Partners providing different lending solutions to SMEs, including term loans and invoice financing. We anticipate that these platforms will continue to win market share from the banks due to their ability to be agile and more customer-friendly. We are also supporting Challenger Banks, that is to say new entrants to the banking market. These emerging banks are often able to leverage technology more effectively than some of our high street banks which will enable them to deliver lending solutions more efficiently to a broader range of SMEs.
How does the British Business Bank work with investors?
We invest alongside institutional, as well as private, investors on a pari-passu basis. When we are investing in a direct lending fund or a VC fund, for example, we want our capital to be catalytic in attracting additional funding. Our capital is typically leveraged up to 5x meaning that we may contribute £30 million out of a £150 million total fund size.