British Business Bank backs FPE Capital with £40 million

The British Business Bank has committed £40 million to FPE Capital's Fund IV, making a cornerstone commitment under its growth equity strategy.

The funding will back high-growth smaller businesses across the UK through FPE's latest fund. Fund IV's first close has already surpassed the total size of FPE's previous fund.

The investment builds on an existing relationship between the two organisations. In 2017, the British Business Bank committed £20 million to FPE's Fund II.

FPE focuses on B2B software, data and software services businesses. It typically invests in companies across the UK and Ireland with enterprise values of £10 million to £75 million. Fund IV will continue to target founder-led businesses, often as the first institutional investor.

The commitment falls within an expanded mandate that allows the bank to invest in lower-mid-market private equity funds supporting smaller businesses linked to the government's eight Industrial Strategy sectors. In this case, the focus is on Digital and Technology and Professional and Business Services.

Funding gap

The announcement highlights continued concern over the availability of finance for businesses that have moved beyond early-stage backing but remain too small to access wider pools of capital on attractive terms. This part of the market has drawn increasing attention from public and private investors looking to support scaling companies outside the largest buyout and venture capital segments.

The bank's growth equity strategy is intended to attract additional private capital into this area while supporting regional growth. It invests on a commercial basis and is designed to expand the supply of scale-up finance for UK companies.

Adam Kelly, Managing Director and Co-Head of Funds at British Business Bank, said, "There is a significant funding gap in the lower-mid-market, particularly for smaller businesses that have outgrown early-stage funding. FPE is helping to address this by providing a flexible solution for businesses at a critical stage of their growth journey. By backing firms like FPE through our expanded mandate, the bank is increasing the supply of capital available to UK businesses ready to move into their next phase of growth."

Sector focus

Founded in 2016, FPE has built its strategy around software, data and services companies that are often at a relatively early stage of institutional ownership. The model centres on a concentrated portfolio, with the investor aiming to use its sector knowledge and network to help companies expand after investment.

This approach places the fund in a part of the market where specialist investors often argue they can offer more targeted support than broader private equity firms. It also reflects continued investor interest in software and data businesses, where recurring revenue and structural digital adoption remain attractive themes.

Richard Coldwell, Investment Director, Funds at British Business Bank, said, "FPE is a specialist growth investor with a strong track record in scaling UK software, data and software services businesses. The bank's commitment will ensure that growth capital is channelled to high-potential companies entering the next stage of their growth journey. By focusing on the Digital and Technology and Professional and Business Services sectors of the Industrial Strategy, FPE will contribute to creating high-value jobs and driving economic growth across the UK."

The investment also underlines the government-backed bank's broader role in supporting smaller business finance through fund commitments rather than direct investment in every case. Its core programmes support £23 billion of finance for almost 64,000 smaller businesses.

Blair McDougall, Minister for Small Business and Economic Transformation, said, "Through our Modern Industrial Strategy, we are unlocking the investment high-growth firms need to thrive and compete from the UK. This support is focused on the most ambitious SMEs in key sectors, enabling them to scale up, create high-quality jobs, power growth and raise living standards across the UK."