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Investment · 3 September '19

LCIF: Observations from the last 4 years in the UK Ventures market

LCIF (London Co-Investment Fund, supported by the Mayor of London) has now closed its final new investment from the initial £23M fund. The fund has now invested in 150 companies alongside 14 pre-eminent co-investment partners. As we move to the next phase of the portfolio growth and continue conversations on the future initiatives, here are a few lessons, statistics and observations over the past 4 years.

The stats so far:

  • Since January 2015, LCIF has invested in 189 funding rounds, in 150 digital, science and technology focused seed stage ventures.
  • Deployed £23M of own funds, alongside £162M from our co-investment partners – total funds raised with our participation stands at £185M.
  • Averages, across the portfolio:

– Investment (initial, per company) £153k

– Holding 4.16%

– Round size £700K,

– Valuation (pre-money) £2.85M

  • Our investees have created over 2,000 jobs in London;
  • Our investee companies, seed/ start-ups when we invested, are operating in over 25 countries across continents;
  • LCIF companies’ collective annualised revenues stand at just shy of £100M – from a standing start;
  • First 5 exists to the likes of Facebook and Just Eat, healthy portfolio returns commensurate with the risk profile of the early stage asset class.

Investment build-up:

We have averaged an investment per working week over the last four years…

Observe the peaks around the Brexit vote and original deadline. In times of uncertainty, LCIF has been called on more and has stepped up often to support our co-investment partners and entrepreneurs in closing investments more efficiently. Our small contribution to ensuring that London has indeed remained open for business and investments!

Consider this against the backdrop of declining VC deals at the earliest stage of VC investments (courtesy Pitchbook Venture Ecosystem Factbook: London, 2018):

Where have we invested…

LCIF is a microcosm of the London VC ecosystem. Our investments by sector reflect the overall activity as well as the preferences of our diverse co-investment partners:

And the lead co-investment partners, thanks to whose efforts, we have been able to build this portfolio:

As is evident, 60% of our investments have been alongside lead angel syndicates or angel platforms, 40% with institutional VCs.

Portfolio Performance so far

It is still early in the life for a seed fund, so caveats apply. However, the performance after 4 years looks healthy, a testament to UK VC as an asset class:

VC investing is certainly not for the faint hearted, as lemons ripen faster than plums. The first few plums have rippend for LCIF though, with acquisitions by the likes of Facebook and Just Eat. The initial trends augur well for the commercial success of this portfolio.

Diversification remains key, and it helps to have a large portfolio across sectors. Our recent valuations against costs, by sector show the trends:

Equally significant are support initiatives for the founder/ managers. Every year, LCIF organises over 30 portfolio activities/ events/ workshops every year to help the key issues such as recruitment, international expansion, IP protection strategies, cyber security, GDPR compliance, sales process establishment, scale-up funding preparations, etc.

Diversity

Diversity in VC and of founders receiving VC investments has rightly become ever more topical in the past few years. Whilst a lot more needs to be done to ensure the investments reflect the diversity of VC founders, LCIF investees have count 20% founding teams with female founders and an equal proportion from BAME backgrounds. Our aim remains to increase this proportion by 50% in our future initiatives.