Barclays Launches £100m Fund For Fast Growing Tech Companies

Kingly Brookes, June 1st, 2015

Barclays’ recent announcement of a £100m fund aimed at backing UK technology companies could well be seen as an attractive alternative for businesses not wishing to sell any equity. The bank says that there is a gap in the way in which UK based technology firms can get finance, and this debt finance fund will help them compete with their US rivals. Debt financing options are widely available in the US, but not in the UK, and Barclays hopes to fill this void.

Barclays plan to lend up to £5m to technology firms, repayable over 3 years, though this is on the proviso that the firm already has venture capital funding secured. The bank hopes that access to this additional funding will act as a catalyst for the technology companies to expand by being able to focus on areas such as R&D and sales and marketing; areas that equity investors tend to deem more of a risk. Barclays believe that the main advantage of bank debt over equity investment is that it supports growth ambitions without having any particular control over the way the company is run, allowing the business to concentrate on its accelerated growth trajectory. It is also a cheaper method of financing (as opposed to equity) which can also lead to dilution of share ownership for existing management.

The UK has seen strong growth within the technology industry of late, with a ‘start-up boom’, particularly in London and Brighton. Consultancy firm Accenture has estimated that investment in the UK in this field has doubled in 2014 compared to the previous year. A report by Barclays builds on this, estimating that technology firms in the UK will grow 4 times faster than GDP in 2015.

This fund will also help Barclays to compete with peer-to-peer lenders and private equity companies. Growth in technical firms tends to be much quicker than the average 15 year growth cycle for business, and Barclays hope they have spotted an opportunity. The bank’s aim is to be able to support companies from start-up right through to being leaders in the market. The attraction of not having to sell equity should give the technical companies more control of this development, and allow them to focus on expansion.

At the time of the fund’s announcement, Barclays stated that “entrepreneurs and SMEs are the lifeblood of the UK economy.” This concentrated backing of such an innovative industry should help with its increasingly rapid expansion and to level the funding playing field with US competitors. After the recent negative headlines in lieu of fines handed out after the foreign exchange market probe, Barclays will want to be seen to be playing a more positive role in the UK economy. Providing access to funding for this exciting industry could help technical companies to the next level.

Image credit: The Guardian