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Spinout investor Northern Gritstone closes £312m fund

Northern Gritstone final close
Image credit: Northern Gritstone

North of England venture capital firm Northern Gritstone has announced its final close of £312m, with more than £150m coming from local authority pension funds.

The VC firm will use the funds to back tech spinouts and startups in Leeds, Manchester and Sheffield.

“Receiving the endorsements of asset managers, mayors and pension funds shows the broad appeal of Northern Gritstone’s offering,” said Lord Jim O’Neill, chair of Northern Gritstone.

“It is a show of faith in the potential for growth in the northern economy and a significant step in our development of a technology and innovation hub in the region.”

The local pension funds that have supplied financing are South Yorkshire Pension Fund, West Yorkshire Pension Fund, Greater Manchester Pension Fund, Merseyside Pension Fund and East Riding Pension Fund.

It comes as the government is exploring ways to encourage more pension funds to allocate some of their cash into technology startups amid concerns over a lack of liquidity in capital markets.

In June, the firm’s CEO Duncan Johnson, revealed to UKTN that it had secured £50m of the fund and there was “another £50m-£100m in the hopper”.

Since its first raise of £215m in 2022, Northern Gritstone has invested in 15 businesses including Manchester photonic coating spinout AssetCool and Leeds-based photonic chip firm Optalysys.

“Our deals have already generated nearly £100m of investment in the North, providing support to some of the country’s most promising businesses,” said Johnson.

Greater Manchester, West Yorkshire and South Yorkshire’s mayors have also contributed to the fund. Institutional investors including M&G, Columbia Threadneedle, British Patient Capital, Lansdowne Partners, and property investor Bruntwood also participated.

British Patient Capital gave Northern Gritstone £30m earlier this year.

Johnson, who previously ran Caledonia Private Capital, spoke with UKTN in June for its regional investor series Beyond the Capital.