One of the UK’s most active VCs, social-impact focused Bethnal Green Ventures, is being acquired by asset manager Connected Asset Management.
The deal is a sign of how pension funds, which are some of the world’s most conservative investors, are increasingly pushing into both venture capital and impact investing.
London-based Connected manages assets for Smart Pension, a UK occupational pension scheme. Through Smart Pension, future pensioners can have exposure to equities and bonds through funds managed by companies like JPMorgan, and now they’ll have access to VC as well.
Impact investing usually refers to investing in companies aiming for both financial returns and a positive environmental or environmental impact.
“Pensions are the ultimate in long-term thinking. If you’re starting to make contributions in your first job when you're 18 or 19, and you’re told you’re not going to get any of that money for at least 40 years, it begs the question: 'What this world is going to be like in 40 years?'” said Paul Miller, BGV CEO and managing partner.
“That’s why there is a recognition in the pension industry that they are talking about long-term issues and they need to engage their members in those issues.”
Unlike their US counterparts, European pensions have traditionally been underindexed on VC versus other asset classes. But interest is growing. According to Invest Europe, pension funds committed nearly three times as much to European VC in 2019 than their average investment over the previous four years. And though regulatory hurdles remain, these traditionally slow-moving, conservative investors are looking to impact investment as a way to engage their beneficiaries.
In reference to increased European pension commitments to VC, Miller told Sifted: “There’s a sense that just investing in public stocks is limiting because there is such a vibrant and mature startup ecosystem in Europe and investment ecosystem compared to what it was 20 years ago. It’s possible for pension funds to look at it now and say, ‘That’s a good, solid, diversified investment.’”
From fringe to mainstream
When BGV launched its first call for applications for its accelerator programme from tech-for-good companies in 2012, Miller says they received just “tens of applications”.
“Tech for good was not something that people thought was a serious sector,” and “there was a discount in terms of valuations,” he adds.
Since then, BGV has invested in 141 companies. One of their portfolio companies is Fairphone, the Dutch company which claims to be producing the world’s most sustainable smartphone. In 2020, portfolio company Second Nature, a ‘habit-change’ app, raised a $10m Series A from Beringea and angels (including Wise founder Taavet Hinrikus), while patient booking software DrDoctor also raised a Series A last year.
BGV was the first UK VC to become a certified B Corp in 2015 and Connected got its certification last year.
In the last few years, Miller says that the sector has really taken off, as more impact funds have emerged and mainstream VC firms have developed their own impact strategies. BGV now receives “in the high hundreds” of applications.
“From under £100k in summer 2012, we’ll be investing over £10m a year,” he says. “We started at the fringes but even this deal is a sign that tech for good is hitting the mainstream.”
Miller says the next step is working on measuring the impact of BGV’s portfolio in a way that resonates with the regular people who are pension beneficiaries.
“If we can manage to link the impact of the startups that we’re backing all the way to that pound that somebody puts into their pension fund, I think that will be a real step forward in terms of impact investing and showing people what is the impact of the money that they’re saving for their retirement.”