Since 2021, investment firm Future Planet Capital (FPC) has secured more than £100m in public funds without any competitive bidding process.
The Department for Science, Innovation and Technology (DSIT) and the UK Space Agency are among the government departments and agencies to have contributed to the £110m UK Innovation & Science Seed Fund (UKI2S).
Midven, a VC firm based in Birmingham, was originally charged with overseeing UKI2S when it first launched in 2002, helping the British government invest tens of millions of pounds in fast-growing companies. That changed four years ago, when FPC bought Midven — making it the fund's new de facto manager.
But since FPC's takeover, business partners and government officials have raised questions over the company’s suitability for the project, sources say.
No bidding war
FPC was founded in 2015 by Douglas Hansen-Luke, a long-time Tory activist who stood as the party's candidate for the Walsall North constituency in the same year, narrowly losing. Lord Wei, a Conservative member of the House of Lords, also sits on the firm’s advisory board.
Sources say FPC has faced scrutiny both internally and from government officials over since its takeover of UKI2S, with some citing the lack of a competitive process, scepticism over the company's plan for UKI2S and the lucrative management fees — estimated to be in the millions — that FPC earns for providing its resources.
In December last year a report into FPC's governance of the funds was shared internally, according to one of its business partners, the UK Space Agency. FPC declined to comment when asked about the contents of the report, and a request for its release under the Freedom of Information Act was denied by the UK Space Agency.
"Future Planet Capital is proud to manage UKI2S on behalf of the government,” Sakura Holloway, investment director at UKI2S, tells Sifted. “Accountability and responsibility are fundamental to what we do — as is backing the UK’s most ambitious innovators and helping them change the world for the better."
Public money
Typically, if a central government agency is subject to procurement regulations, it must undergo a competitive and transparent process for most services with fees over £139,688.
FPC declined to comment when asked to clarify how big a management fee it earns for running UKI2S, but if in line with the market norm — 2% of assets under management — the firm would expect to receive £2.2m a year from the government for overseeing the fund.
To date, the only competitive process for the management of UKI2S occurred when Midven took it on 23 years ago, and the fund was worth just £4m.
Since FPC took on UKI2S, government bodies have continued to channel millions more into the fund, each time without having to bid for the role. The pot now stands at £110m.
Many UK VCs receive funding from public entities with of the most common distributors being the British Business Bank. It recently awarded £150m to Schroders Capital, £100m to ICG and £207m to Mercia Asset Management — all, it says, following “a highly competitive” bidding process.
FPC tells Sifted that its takeover of UKI2S didn’t require competitive tender because it became the manager of the fund when it acquired the previous general partner, Midven.
And FPC is currently looking to raise more public money for a new fund for pension fund managers looking to invest in VC — some of which it said would come from local government pension pots.
“The fund has already secured one local government pension scheme investor and a public statement of support from Timpson Group,” Holloway says. “Active partnership discussions continue with private DC pensions, LGPS and development funds.”
She adds that the fund intends to make its first investments in the second half of this year.
The UK government told Sifted that the UKI2S fund was “central” to its efforts to help innovative new British businesses scale up, by backing projects that can create jobs and drive growth.
