Government Backs Britain’s First Cyber Seed Fund, Worth £50m

The government-backed British Business Bank has committed nearly three-quarters of the £50m ($64m) fund which launched today to help early-stage UK cyber-startups.

Venture capital firm Osney Capital’s Fund 1 plans to invest between £250,000 and £2.5m in 30 portfolio companies at pre-seed and seed stage, before stumping up for follow-on Series A rounds.

The Cheltenham-based VC firm said the fund was oversubscribed, such is the excitement around the UK’s burgeoning cyber startup scene.

The UK’s cyber sector increased total revenue by 12% annually to reach £13.2bn last year, and grew its gross value added (GVA) sum by 21% to hit £7.8bn, according to government figures released last month.

Read more on UK startups: Government Wants Startups to Build a More Secure Nation

The report revealed that there are an estimated 2165 cybersecurity firms currently operating in the UK, an increase of 74 from the previous year, with most (56%) defined as microbusinesses.

An extra 6600 full-time jobs were added to the sector last year – an 11% annual increase – bringing the total number to 67,300. However, skills and funding are persistent challenges.

A lack of technically skilled candidates (47%) and unaffordable salary demands (46%) were the top two cited challenges in this area, followed by competition from rival businesses (39%).

Osney Capital argued that the startup sector struggles to attract funding due to its “decentralised and closed-networked nature,” opening the door for a specialized seed investor to back promising firms early so they can scale and attract global investment.

“The UK’s cyber ecosystem is one of the country’s greatest untapped strengths. With world-class talent and the scale to produce the next generation of industry leaders, we have a unique opportunity to compete on the global stage,” said Osney Capital partner, Joshua Walter.

“Our mission with this fund is to identify and back the next wave of UK cyber founders – providing them with the specialist capital they need to build globally significant companies, products and technologies.” 

Startups Are Important for National Security

British Business Bank’s £36m contribution to the Osney Capital fund also speaks to the growing strategic importance of cybersecurity to the government.

Fiona Murray, who serves on the Prime Minister’s Council for Science and Technology and is vice-chair of the Board of Directors of the NATO Innovation Fund, echoed such sentiments.

“Science and technology are essential to national competitiveness and increasingly, our competitiveness is grounded in national security,” she argued.

“In times of global uncertainty, we must foster a safe, secure and trusted digital economy in the UK – across all our digital and physical infrastructure. This means investing in and promoting innovation in the UK’s cybersecurity ecosystem. The work of Osney Capital’s fund is a matter of national security, digital sovereignty, and economic leadership.”