Metro Mayor Steve Rotheram launches £10m business seed fund, but some of the Liverpool City Region Combined Authority’s previous investment decisions have been questionable – can it find some real winners? Tony McDonough reports
Metro Mayor Steve Rotheram has unveiled a new £10m seed fund to offer cash investments of £250,000 to £2m to potential high-growth businesses.
Open to ventures across all sectors, the fund particularly encourages applications from companies operating in the region’s key growth areas: advanced manufacturing, digital and creative industries and health and life sciences.
Manchester-based AXM Venture Capital has been chosen to administer the fund. This is despite the Combined Authority (CA) having an experienced SME funding specialist, River Capital, right on its doorstep in Liverpool.
Mr Rotheram announced the fund at the LCR Talking Business Conference, the region’s annual summit for business leaders and entrepreneurs.
He said: “Small businesses are the bedrock of our economy – not just here in the Liverpool city region, but across the country. They make up 99% of all companies in our area and are the engine of innovation, opportunity and job creation.
“But I hear all too often from local entrepreneurs that, when it comes to scaling up, the support just isn’t there – especially outside London. We’re stepping in with a £10m fund in an effort to help turn great local ideas into thriving national success stories.
“I want to back local talent, create high-quality jobs, and give people the chance to build something for themselves and their community. When local businesses grow, it’s not just good for our region but for the national economy too.”
He is correct when he says that seed funding for entrepreneurs is much-needed but the CA’s recent track record of investing in high growth potential businesses has been a mixed one. And, in one case, it was a dismal failure…
Peepl
In 2021, to much fanfare, Mr Rotheram announced the CA would back digital entrepreneur Leon Rossiter to the tune of £700,000. Leon’s Liverpool food delivery business was going to take on the established big players such as Deliveroo and Just Eat.
His Peepl venture aimed to keep money flowing around the local economy. The big delivery brands were taking up to 37.5% commission from local restaurants and takeaways on each meal sold and delivered.
Peepl aimed to disrupt this model, pledging to take commission of between just 5% and 10%. In 2022 Leon told LBN: “Entities such as Deliveroo, Amazon and Uber are all extracting money out of local economies. We are here to try to counteract some of that leakage.”
However, by late 2023 Leon had admitted to Liverpool online publication The Post that he was in the process of filing for insolvency. Although the CA never paid out the full £700,000, city region taxpayers still ended up £433,000 out of pocket.
Surface Transforms
In December 2023 the CA agreed to lend £13.2m from its Urban Development Fund to Knowsley supercar carbon fibre brake disc maker Surface Transforms (ST) with the primary aim of creating 70 high value jobs.
Founded in 1992, ST manufactures carbon fibre reinforced ceramic automotive brake discs for high performance cars. Customers of the business include, or have included, Porsche, Ferrari, Jaguar Land Rover and Aston Martin.
It currently has a forward order book of £390m and says its prospective customer pipeline is worth around £700m. However, despite the popularity of its products in 2023 ST experienced what it described as “the most difficult year in the history of the company”.
It has been dogged by issues related to the ramping up of production and those troubles continued into 2024. Earlier in the year the company tested the patience of its investors further by tapping them for an extra £9.5m.
This month it revealed annual revenues of £8.5m and eye-watering pre-tax losses of almost £23.9m.
It is listed on the Alternative Investment Market and in its latest update to the stock market it admitted a “material uncertainty that may cast significant doubt over the company’s ability to continue as a going concern”.
Its products are highly sought after by the global automotive sector, and it may well come good. But this year is a crunch year for the company, its 170 employees and its investors – including the CA.
This latest seed fund is designed to help the city region reach its target of spending 5% of its economy on research and development (R&D) by 2030 – nearly double the national target.
Investing in businesses is never a precise science. There is always an element of risk and there are those who believe it is an area the public sector should stay out of. The fact that AXM is an experienced investment specialised perhaps offers some reassurance.
Click here for more information or to apply to the fund.