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UK’s first fast growth technology fund, as Barclays injects £100m into fast growth technology companies

In a UK first, Barclays is launching a new £100m fund today to help fast growing technology businesses accelerate to the next level.

The new drive will see the bank backing some of the most innovative UK technology businesses with lending of up to £5m, repayable over three years.

Until now, this type of lending has not been widely available to UK businesses, whereas their US counterparts have been able to grow rapidly through access to debt finance.

Because fast-growing technology firms develop much more rapidly than the 15 year average of traditional businesses, they stand to benefit from new access to debt finance, as an alternative to selling equity. This will also allow leading entrepreneurs to retain control of their company’s development and concentrate on accelerated growth. 

A recent report by Barclays showed that UK technology businesses are expected to grow four times faster than GDP in 2015.

Launching the new fund during a visit to high-growth technology firms in Cambridge, Ashok Vaswani, Chief Executive of Barclays Personal and Corporate Banking, said:

“This new fund offers a welcome boost to growing UK technology firms, and will provide a catalyst for their development into larger companies. It is part of our plans to deliver the kind of pro-growth financial backing for UK business that US firms already enjoy.

“We identified a significant gap in the traditional way technology businesses were financed, and with this new drive we will be truly able to support businesses right from their inception, to becoming major global players.

“Entrepreneurs and SMEs are the life blood of the UK economy and the technology sector is an incredible incubator for many of these talented individuals and businesses. The rapid growth we’ve seen in the UK rivals the activity and dynamism of Silicon Valley with record levels of investment from the US into London-based technology firms in particular.”

Sean Duffy, Managing Director, Barclays’ Technology, Media and Telecoms team, said: “Fast-growth technology companies in the US have long been able to access debt finance early in the life cycle, and some of the most successful US technology firms, including Facebook and Google, have grown their businesses with help from this type of funding. 

“We believe it is important for fast-growth technology companies in the UK to be able to access a similar range of financing solutions, including early-stage debt funding, which together with existing equity investment can provide businesses with a more efficient capital structure.   

“As the first bank to introduce a dedicated Technology, Media and Telecoms team we understand the complexity and competitiveness of this rapidly evolving sector and believe this fund is another example of how we are continually innovating to support technology companies”. 
Notes to editors

Barclays is offering fast-growth technology businesses loans of up to £5m, repayable over three years provided venture capital has already been secured. 

In the UK, fast-growth technology companies have traditionally relied on equity investment to fund growth. However, there are a growing number of companies for which a modest amount of debt financing at this critical stage in their life cycle would be beneficial. 

Businesses typically take 15 years to go through the growth cycle from start-up to large corporate. For a fast-growth technology business this can be achieved in a much shorter time frame. 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 also leads to dilution of share ownership for existing management.

The standard approach for cash flow lending to any business at this stage in the life cycle has been to look for a history of positive EBITDA and strong cash generation. However, rapidly expanding technology companies will reach profitability at the operating line and choose to reinvest this cash back into the business leaving them deliberately running off low EBITDA in order to feed top-line growth. 

Typically, they will invest in research and development and sales and marketing, in order to quickly grow their customer base and take market share from competitors. However, this has left conventional European lenders, unable to get comfortable with the risks involved, out of the market, and leaving fast-growing technology companies with a debt funding gap at a critical point in their cycle. 

 

About Barclays

Barclays is an international financial services provider engaged in personal, corporate and investment banking, credit cards and wealth management with an extensive presence in Europe, the Americas, Africa and Asia. Barclays’ purpose is to help people achieve their ambitions – in the right way.

With 325 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 130,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.

For further information about Barclays, please visit our website www.barclays.com.