London Par not seeking equity as VC firm targets £100m in North UK startups


London Par not seeking equity as VC firm targets £100m in North UK startups -Gudstory

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Any conversation focused on the UK tech scene often has a strong center of gravity in the south of the country – for many people, “UK” and “London” may be the same thing.

A recent report by the House of Commons committee on venture capital allocation pointed to “unequal levels of VC investment” across the UK, with the so-called “Golden Triangle” of London, Oxford and Cambridge attracting around 80 per cent of the country’s total investment. We do. According to data from Dealroom, the largest share – around 70 per cent of the total – is poured into the Greater London area.

And that’s something Edinburgh-based VC firm Par Equity is looking to address with a new £100 million fund targeting early-stage startups in the North.

‘sensible assessment’

While the legendary history of Cambridge and Oxford attracts some of the world’s greatest minds, and the nearby capital London serves as a perennial draw for top talent like UCL and Imperial College, the rest of the UK absolutely lacks it. Not there. Either when it comes to academic credentials – whether that’s through the so-called “red brick” universities of Manchester, Sheffield, Liverpool and Leeds, or further north in places like Edinburgh where greats like Charles Darwin and Alexander Graham Bell studied. Have done.

Add into the mix the ability to secure more favorable terms away from the bustling south, and it is easy to see why an investor might be tempted to focus their attention on locations further afield.

“In the north of the UK we have the combination of academic institutions with world-class R&D departments, as well as a rich manufacturing and engineering heritage, producing talent and innovation,” Paul Munn, managing partner of Par Equity, told TechCrunch. which are available at reasonable valuations.” “In 2022, we backed an advanced materials business at one-sixth the valuation of our high-profile competitor based in the ‘Golden Triangle’, which raised £60 million with an inferior product. “Fast forward 18 months, key staff members are leaving this competitor and looking to join our portfolio company.”

Par Equity, Edinburgh.

Par Equity Team in Edinburgh Image Credit:equal equity

the story So Far

The roots of Par Equity can be traced back to 2008, beginning with an inaugural “Innovation Fund” of £4.8 million in angel capital. This was followed in 2012 by the introduction of a £40 million EIS (Enterprise Investment Scheme) fund, which is essentially a tax-efficient investment initiative for high net worth individuals.

In addition, Par Equity is also deploying capital raised through its Par Investor Network angel community, the British Business Investment (BBI) Regional Angel Program and Scottish Enterprise, the Scottish Government’s innovation-focused investment body. Overall, Par Equity has deployed approximately £167 million of capital to date, across 423 individual transactions including 78 startup and follow-on investments.

Today’s announcement is about Par Equity’s first institutional VC fund, called Par Equity Ventures I LP, with Scottish National Investment Bank and BBI leading the majority of the fund with additional input from Strathclyde Pension Fund.

While Par Equity is targeting £100 million overall, its first close sits at £67 million, and will be aimed at “high growth potential” tech companies in the north of the UK, particularly businesses with strong IP. Specifically, Par Equity will focus on climate tech, industrial tech and health tech, with the latter category serving an attractive exit for Par Equity when Best Buy acquires its Edinburgh-based portfolio company Current Health for $400 million in 2021. Acquired.

Now, investment boundaries can be somewhat blurred because there is no straight line dividing North and South. But for its investment purposes, Par Equity will focus on the Midlands, which obviously includes Scotland and Northern Ireland. And while the fund will be managed from Par Equity’s central Edinburgh office, it has also recently opened centers in Leeds and Sheffield which will act in a support capacity.

Historically, the South – and London in particular – has always been a huge attraction for budding startup founders, largely due to the availability of capital and talent. However, the remote-work revolution driven by the global pandemic, coupled with the macroeconomic environment, may encourage founders to reconsider where they call home. And that’s why now could be a good time to double down on investment across the UK

“We have half of the UK’s best universities in the North, many of which are world-class in their science, technology and engineering departments,” Munn said. “Sadly, over the last 15 years, we have seen companies and talent flee the north of the UK to London. There is no denying the magnetic attraction of the capital, however since Covid, and with the cost of living rising, we are seeing more graduates living in the regions than ever before.


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