Despite the obvious hurdles presented by Brexit and the COVID-19 pandemic, investment in UK businesses has been booming over 2021.
In fact, according to figures released by Innovate Finance, the UK fintech sector secured record-breaking investment in the first six months of 2021.
The UK’s e-commerce sector has also experienced tremendous growth due to the increase in online shopping and advancements in online payments.
Recent figures from the Office of National Statistics (ONS) show the UK as the fourth largest e-commerce market worldwide, with a total revenue of $693 billion in 2019 and a forecasted growth of 34% by 2023.
This level of growth is drawing attention, with more finance and e-commerce-focused companies looking to the UK for investment opportunities.
Canadian-headquartered growth capital company Clearco, a fintech capital provider for online businesses, is one such company looking to expand its presence in the UK market, spearheaded by Chief Growth Officer Ruma Bose and Head of UK Sarah Clark.
“The e-commerce ecosystem here in the UK, I would argue, is amongst the most sophisticated and advanced in the globe,” Sarah tells FinTech Futures.
“I think it’s an ideal time to be investing in e-commerce businesses in the UK.”
Founded as Clearbanc in 2015, Clearco offers what it calls “founder-friendly” capital solutions for e-commerce, mobile apps, and cloud-based software-as-a-service start-ups.
The company, which has invested more than $2 billion in over 5,500 companies globally, has now been operating in the UK since last October.
“We’re already over £80 million invested and more than 400 founders that we’ve backed to date,” says Sarah.
The fintech firm also provides financial services for start-ups in the form of data-driven insights into spend and performance as well as benchmarking data to compare spend with other companies.
Clearco uses a revenue-based financing model to fund growing companies, focusing heavily on data and artificial intelligence (AI) to provide insights into future growth.
“We use our algorithms developed against data from thousands of businesses that we have connected into our system to forecast what their revenues will look like if we extend them capital.”
This data and AI-driven method removes any location bias from its funding decisions, meaning around 70% of the UK start-ups to receive financing from Clearco are based outside of London.
“I think there’s an advantage to e-commerce businesses being outside of some of the major metropolitan areas, like having cheaper rent and access to high quality talent who perhaps want a different quality of life,” says Sarah.
“It’s just that there are very good and very successful businesses that exist outside of London.”
Democratising access to capital
Clearco’s focus on data also means the firm removes any bias surrounding gender or race when it comes to funding start-ups.
The company says it funded eight times as many companies led by women as traditional VC firms in 2020, while 13% of Clearco’s funding went to companies headed by Black and LatinX founders, compared to 2.6% – from Crunchbase data – for traditional VC firms.
“I’ve been around VCs for many years and I can tell you that it is primarily male dominated and very white,” says Ruma.
“And usually, if you’ve got an all-male investment team, it’s just your unconscious bias. You will gravitate towards businesses or areas that you’re interested in.
“The data’s there to show that even when women are able to pitch to VCs and investment teams, only one in 10 actually get funded.
“Because we fund based on the data and performance of your business, it doesn’t matter if you’re male or female, or a minority, where you live, or where you went to school, we’re democratising access to capital.”
Fairer access to capital will no doubt foster increased diversity in UK businesses while also benefiting the economy as a whole. According to a recent report by OPEN, commissioned by MSDUK, eight of the UK’s 23 tech unicorns were co-founded by minority entrepreneurs along with 23 of the country’s top 100 fastest-growing companies in 2019.
The Rose Review into female entrepreneurship in 2019 found that around one in three UK entrepreneurs is female, but female-led businesses receive less funding than male-led firms “at every stage of their journey”.
“When VCs say there aren’t enough good female-led businesses to invest in, that’s simply not the case. And if you strike out the bias and actually let the data speak for themselves, they have wonderful businesses and they grow incredibly well when they’re given capital and support,” says Sarah.
In fact, research carried out by McKinsey & Co has shown that companies with the greatest gender diversity on their executive teams are 21% more likely to outperform peers on profitability and 27% more likely to create superior value, boosting the UK economy further.
“Our mantra is the idea that talent and ambition exist everywhere, but opportunity does not, and we want to bring the opportunity to all entrepreneurs,” adds Ruma.
Clearco raised $215 million in a Series C funding round led by SoftBank’s Vision Fund 2 in July, and as well as its push to increase its presence in the UK, the firm is also targeting further global expansion.
Until then, the UK is still firmly in Clearco’s headlights. Sarah adds: “Our ultimate objective is to invest £500 million into UK start-ups.”
- artificial intelligence
- Artificial intelligence (AI)
- COVID-19 pandemic
- financial services
- Funding Round
- global expansion
- growth capital
- Online Businesses
- online payments
- online shopping
- Series C
- software as a service
- VISION FUND