The sun shines through the windows onto the Mansion House’s ornate stucco as the Mayor of London explains his goal of creating a British technology investment fund to rival Silicon Valley.
The Palladian grandeur of the 18th-century residence across from the Bank of England seems an incongruous place for Nicholas Lyons to lay out his goal: to take on California’s venture capital giants who have dominated the scene for five decades.
But Lyons is expressing his resolve on a plan for a Future Growth Fund, which could help UK savers reap the benefits of this country’s talent for innovation.
He has been trying for some time to set up a £50bn fund to channel pension investment to start-ups and growth companies, but the idea has run into difficulties.
But he hints that a big announcement on progress is likely when Chancellor Jeremy Hunt delivers his annual Mansion House speech next Monday.
Past and present: Mayor Nicholas Lyons wants to take on California’s venture capital giants
Lyons wants Future Growth, funded by a levy from UK pension funds, to be ‘as good as it gets’… leading in the world, so it sits alongside Sequoia Capital as a globally recognized specialist in late-stage venture capital for tech companies.” .
It’s a big ambition. Founded in 1972, Sequoia has backed companies like Apple, Google, and Instagram.
A common complaint in Britain, cited by Lyons, is that when innovative new companies want to ‘scale up’ to become world beaters, they are forced to seek capital from abroad or even move abroad.
That means it’s foreign investors — from U.S. venture capitalists to giant Canadian pension funds — who often reap the greatest rewards from the cutting-edge technology developed here.
Lyons wants UK pension funds to put 5 per cent of the money they provide into the fund or through their own start-up support schemes.
That could add up to a fund worth £25-30bn by 2030 and if the efforts of the larger funds are included, the total would be £50bn.
It comes during the soul-searching decision of companies like chip designer Arm choosing to list in New York rather than London.
Lyons says his fund will help Britain keep ‘many more companies – grow and scale and stay in the UK’.
Rumors that pension funds could be forced to invest have been met with resistance from managers who say it could clash with obligations to depositors.
But Lyons is not in favor of coercion, saying, “If you set up a Future Growth Fund and you get a lot of the big players saying, ‘This is the fund we’re going to use,’ you get a sense that it’s acceptable to to do.
“I think people are always nervous about doing something and putting their head above their chest.
“That’s exactly why we have the problem that we have, which is that we’ve had a sheepish mentality of always doing the same thing, and as a result, we have a very mediocre return on our pension system. ‘
The first goal will be to convince the big firms to allocate 5% of defined contribution pension pots to unlisted stocks. “We are working towards an agreement of people who control more than 50 percent of the market to say ‘yes’ and they will all be big names.”
Apple’s headquarters in Silicon Valley, USA. Pension fund Sequoia Capital, founded in 1972, supported Apple, Google and Instagram, among others
Lyons would not identify any of them or when an announcement would be made, but added, “We’ve got the Mansion House speech coming up — who knows?
“Normally that is the opportunity for the Chancellor to make major announcements. We have been in contact with no. 11 about this in recent months.’
He is confident the fund will “eventually grow a lot bigger” than the £25-30bn scale he initially envisions for it.
“Whenever I go abroad and speak to the big asset owners, they all say: we would like to invest in the Future Growth Fund… so there will be huge demand. In fact, you are playing a game with the intellectual property of this country.’
Lyons is chairman of Phoenix Group, Britain’s largest pension firm, but is on sabbatical for his year as mayor, a position that dates back to the Middle Ages and is better known today for its ceremonial function.
Lyons spoke to the Mail at the Mansion House – where he lives with his wife – and clearly enjoys the formal trappings.
He shows off the velvet and ermine robes with gold braid he wore to the coronation and speaks enthusiastically of the pageantry of an event that was directly linked to four-time mayor Dick Whittington.
This year marks the 600th anniversary of Whittington’s death and the crystal scepter Lyons held at the coronation dates from that time. It was given to the City of London after the Battle of Azincourt and used at a coronation in 1421 when Henry V’s queen, Catherine of Valois, was crowned.
The 64-year-old, who has worked at City for four decades, wants to use his experience to make a difference.
He adds that he has the “huge advantage” of being able to “oversee the entirety of the financial and professional services business” and identify areas for improvement.
I felt we were underperforming in terms of pensions, providing capital to growth companies, investing in infrastructure and financial literacy for people in this country.
‘I didn’t see myself as an activist, I saw myself as someone who was shouting where we should find solutions together.
We cannot sit on our laurels. I believe the role of the mayor is a great opportunity to come together and shine a light on what we’re good at and what we’re not so good at, and to try to bring people together to find solutions to find.
“And I hope future mayors will do the same.”
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