Raising Finance

There’s a first time for everything – and a tech VC fund listed on AIM is one of them

3 min read

15 June 2016

Venture capital (VC) firm Draper Espirit has been admitted to AIM, the London Stock Exchange’s junior market. This, the investment team said, was crucial for the company to realise its ambition of becoming a $1bn business within a few years.

This is said to be the first time a tech-focused VC fund has floated – following in the footsteps of listed investors such as Imperial Innovations and IP Group, which focus on university spin-outs.

According to Simon Cook, CEO of Draper Espirit, the IPO is set to raise an initial £102m of permanent capital. “That’s permanent capital – i.e. money we can grow and invest over and over again in generations of startups, not a one-time fund,” he said. “But why IPO a venture firm?”

Europe, and especially the UK, lead the way globally when it comes to innovation in financial technology, he explained. “From crowdfunding to currency exchange, the environment for innovation in Britain sometimes challenges the US and has driven the ‘Fintech’ revolution to its recent highs. But there is currently a gap in the market for the creation of a listed venture capital vehicle which can invest in the new generation of early and growth stage digital businesses in order to deliver attractive long term returns for investors.”

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So by IPO-ing, Cook suggested, Draper Esprit would join a number of successful “patient capital”, non-LP VC firms already providing long term permanent capital to technology companies – think Ventures, Eight Roads and Octopus Ventures.

Having a different view is risky though, he said in a recent blog piece. “As every entrepreneur who has had that ‘eureka!’ moment appreciates, you learn that others often don’t see things the same way immediately; many will disagree, and the pull of the status quo is formidable. But the motivations for evolving the VC business model were threefold.”

Firstly, Cook explained the firm wanted to invest for longer in emerging companies and to be able to build bigger stakes as firms remained private for a more extended period. Secondly, Draper Espirit wanted to further democratise funding for entrepreneurs.

“Our third motivation was to add depth to our culture – to help Draper Esprit become a more permanent business, moving away from the risks of only being as good as our last fund, creating a vision for a firm that will be here in 20 years’ time or longer,” Cook said. “Like our best portfolio companies we can look beyond our next fund raise, and that will allow us to invest more in our business, people and brand.”

AIM provides an excellent option for SMEs to raise growth capital by the sale of shares within a regulatory regime specifically designed for their needs. But why should you consider AIM? And what do you need to do in the run up to, and after, a successful flotation?