This time last year, Joe Parkin was BlackRock’s head of banks and digital channels. He was responsible for getting the asset manager’s products into the hands of fintechs, robo-advisers and investment platforms.
Now, he has swapped the world’s largest money manager for a small office in the City. It has just 10 staff. He even assembled the flatpack furniture himself before they moved in.
Parkin is one of four partners that launched the Fintech Growth Fund in August. Back in 2021, the Kalifa Review into the sector said UK fintechs faced a £2bn annual gap in growth funding.
“A number of us were involved in the Kalifa Review. Fast forward 18 months, it came to a point where a group of people got together who wanted to do something about [the UK fintech funding gap],” said Parkin.
The mission for Parkin and his three partners is a simple one: to invest up to £1bn in early-stage UK fintechs, helping them scale and prevent the exodus of young companies and entrepreneurs to rival financial centres such as the US.
“£1bn is a big target,” said Parkin. “But the more important thing is to get firms to commit to the growth stage of companies in the UK.
“They struggle to secure domestic funding at that stage. If we can get as many firms committed as possible, it will be huge for the IPO market, the creation of jobs across the UK, and innovation across financial services.”
The fund already has the backing of some big-name institutions, including Barclays, NatWest, London Stock Exchange Group and Peel Hunt.
There are several tailwinds that could also work in the fund’s favour as it looks to raise capital, notably an agreement in July by some of the UK’s largest pension funds — including Aviva, L&G and M&G — to commit 5% of their assets to unlisted companies by 2030.
The missing piece in the IPO puzzle
The launch of the Fintech Growth Fund comes as the City continues to grapple with a shortage of IPOs. Prominent UK names including chip designer Arm, betting group Flutter and building materials giant CRH have opted to list in the US.
Parkin does not necessarily think the current status of the UK IPO market represents a drought. However, he said providing funding for young companies at an early stage might help stem some of the flight to rival markets.
“To solve the IPO challenge, we also need to make sure firms go from series B funding right through their journey with the right support, guidance and advice. You need to build that pipeline,” he said.
“The lack of capital identified in the Kalifa Review at that growth stage is contributing to the problem of potentially IPOing elsewhere. By the time firms get to a position where they are looking to IPO, it is too late.
“I wouldn’t say that it is a surprise that firms are looking to IPO in the US. But it’s a solvable problem.”
Who runs the Fintech Growth Fund?
Alongside Parkin, other partners involved with the fund include former Nomura global head of corporate development and strategic investments Angel Issa, and the CEO of the FinTech Alliance and former head of global markets at the Treasury Phil Vidler.
Kaushalya Somasundaram, a former executive at Square and HSBC, is also a partner.
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The quartet has assembled a heavy-hitting advisory board, chaired by former chancellor Lord Philip Hammond. They include former government minister Lord Gerry Grimstone, PensionBee CEO Romi Savova, asset management veteran Helena Morrissey and former Virgin Money CEO Dame Jayne-Anne Gadhia.
“They all come with huge experience,” said Parkin. “They know a huge amount of people and potential fundraising opportunities for us. They also bring a wealth of experience to help us as partners.”
The fund, which is expected to make its first investment before the end of the year, will look to deploy between £10m and £100m, with all stakes made being minority investments. The fund will look to make between four and eight investments a year on average.
How do you pick the best fintech investments?
Parkin said that out of approximately 3,200 UK fintechs, 750 would be at the stage where the fund would consider an investment. The team has whittled that number down to around 300.
“There is no shortage of firms reaching out to us,” said Parkin. “But we’re not going to make loads of investments. We want to pick champions in their field.”
There is also a plan to grow headcount at the fund, which will involve hiring more people to focus on opportunities across the UK.
“The regions are a critical part of our strategy,” said Parkin. “Fintech is flourishing, whether it’s the bodies that sit around the UK, great universities, or companies founded in the regions that have grown.”
To contact the author of this story with feedback or news, email David Ricketts
