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Mayor of London pumps £25m into “side-car” early-stage investment fund

London has a new city-funded investment vehicle that acts a “side-car” by providing as much as £1.5 million in investors looking to take the plunge into backing early-stage companies.

Related: London’s Tech City tops UK new business chart with 15,000 new startups last year

The London Co-Investment Fund [LCIF] has already secured a £25 million investment from the Mayor of London and the London Enterprise Panel’s “Growing Places Fund” and it wants to use it to plug the funding gap facing London technology start ups when seeking to raise seed investment.

“The LCIF is an important step towards enabling start-ups in London’s burgeoning Tech cluster to raise a significantly large seed round, so that they have enough resources to “prove the market” and thereby be in a position to raise follow on money that will give them the best chance to become world leading companies,” said John Spindler, CEO of Capital Enterprise.

LCIF wants to co-invest alongside up to eight competitively selected partners in the early-stage investment community and desires a particular focus on digital, science and technology businesses based in London.

It operates as a “side-car” fund by providing between £1 million and £1.5 million of its “pool” to co-investment partners that is added to an investment firm’s money and then used to help out London-based business selected exclusively by the co-investors.

The plan is to invest in businesses from accelerators, incubators and support programmes that are looking to raise between £250,000 and £1 million as this is “the largest gap in the market for investment” according to the release.

Related: Beyond Tech City: why UK startups should look outside of East London

LCIF will start to invest in companies towards the end of 2014 and it wants to back as many as 210 early stage businesses over the coming three years.