Draper Esprit plans to invest $100m into 20 seed funds over the next five years to counteract the potential loss of funding from the European Investment Fund
It’s hardly a secret that UK startups depend on the European Investment Fund (EIF) for money, especially given the fund has invested €2.3bn into the UK startup ecosystem between 2011 and 2015. But it has become more difficult for British enterprises to rely on it as a source of funding after the triggering of Article 50 saw the EIF becoming more hesitant to invest in UK startups. Fortunately, Draper Esprit, the VC firm, has a plan to help bridge the funding gap.
The company has announced plans to invest $100m in 20 seed funds over the next five years. And the company has just kicked off by boosting the finances of Episode 1 Ventures and Seedcamp, two seed investors that missed out on funding following the Brexit referendum. While the EIF has acknowledged that funding is expected to slow, it has explained that extra due diligence to counteract the market uncertainties caused by Brexit. Draper Esprit is also currently looking at three other investments.
However, the initiative isn’t the only one aimed at bridging the funding gap. During last year’s autumn statement, Phil Hammond pledged to provide the British Business Bank with an extra £400m to invest in UK startups looking to scale. Theresa May reiterated this pledge as a part of the Conservatives’ general election manifesto. Additionally, the Treasury is currently in the midst of a consultation on proposals to ensure there is adequate funding for startups, including the potential of launching a new national investment fund.
Commenting on the firm’s investment, Simon Cook, CEO of Draper Esprit, said: “By partnering with the best seed funds we can help them scale up their series A and B funding rounds more quickly, which in turn will accelerate growth for the most ambitious entrepreneurs.” He added: “Having established itself as a leading hub for technology entrepreneurs from all over the world, the UK needs to keep supporting all stages of venture funding.”
Draper Esprit’s initiative is certainly welcome but with the EIF having provided a third of VC investments on these shores, its clear that more needs to be done to bridge the funding gap.