UK venture capital firm Sure Valley Ventures has raised £85m for a fund to back 25 early-stage British software startups in sectors including the metaverse, artificial intelligence (AI) and cybersecurity.
The British Business Bank, a government-owned but independent investment bank, provided £50m to the fund via its Enterprise Capital Funds programme. The remaining £35m came from new and existing private investors.
Sure Valley Ventures, which shared the first close exclusively with UKTN, said it plans to raise an additional £10m over the next six months from private investors, bringing the total capital at its disposal to £95m.
The VC firm will “broadly” split the cash from its UK Software Venture Capital Fund equally across the 25 startups it selects.
This will see it put around £3.5m to £4m into each startup from Seed stage up to Series B.
Barry Downes, co-founder and managing partner of Sure Valley Ventures, told UKTN that the firm would be looking to make an initial seed investment of around £1m to £1.5m per company for “between 15% and 20% equity”.
Sure Valley will hold the remaining allocated capital in “reserve” to invest in subsequent Series A and Series B rounds.
The VC firm says 93% of the companies it has invested in have gone on to raise follow-on Series A or B rounds within two years of the first Seed investment.
Established in 2016, Sure Valley Capital was created by former tech founders to focus on the UK and Ireland tech market. In addition to providing capital, the VC firm operates a platform to create tailored programmes to mentor and assist the founders that it invests in.
Downes said that his firm is looking to back “big impact” software startups that Sure Valley Ventures calls “disruptive innovation”. He said that he and his team’s background in tech helps it “get under the hood” of a company’s product and communicate its value to investors who might be less familiar with the underlying technology.
“Because we’re technology people and founders ourselves, we tend to go for the companies that have platform technology or underpinning technology,” said Downes. “That’s one thing I think you’ll see in terms of our investment style – much more focused on the underlying tech.”
Downes is bullish on the metaverse – a catch-all term to describe digital worlds accessed by virtual and augmented reality headsets. He wants to ensure Sure Valley Ventures is on the “right side” of this latest trend, both from an economic and societal point of view.
Sure Valley Ventures has a track record for backing companies working in the metaverse. Last summer, it invested in VividQ, a Cambridge software company turning consumer displays into holographic displays.
It has also backed Exchange XR, an Irish metaverse meeting platform that went public in 2018.
Sure Valley Ventures looks beyond London
Sure Valley has also announced that it is opening a new office in Manchester to use as a hub for investing in startups in the North of England, Scotland and Northern Ireland. It currently has offices in London, Dublin and Cambridge.
It reflects a broader trend among the UK’s tech ecosystem, with the pandemic shift to remote working helping to accelerate the growth of the UK’s tech clusters located outside of the capital.
“The AI and immersive tech sectors are major British success stories and investments like this one by Sure Valley Ventures ensures that early-stage companies in the Northern Regions can access the funding necessary to help them compete at the forefront of global innovation,” said Lord Gerry Grimstone, minister for investment.
“It’s fantastic to see this investment into the North of England which demonstrates the UK’s investment attractiveness as we continue to level up all parts of the UK.”
Ken Cooper, managing director of venture solutions at the British Business Bank, said that its Enterprise Capital Funds lowered the barriers to entries for emerging funds and “those targeting underserved areas of the market”.
Cooper added: “Our cornerstone commitment to Sure Valley will support investment into high potential, early-stage software companies that are leading change in the disruptive tech sector, across the UK.”