The British Business Bank (BBB), a state-owned development agency, has long been tasked with supporting smaller businesses in the UK. However, its recent £25 million equity investment in Kraken Technologies, a software platform valued at £6.45 billion, has raised eyebrows within the financial community.
Traditionally, the BBB’s mission has been to “help smaller businesses get the finance they need to start, scale and stay in the UK.” This mandate has been praised for addressing gaps in the financing ecosystem, particularly for startups and promising young companies in the tech and life sciences sectors.
Yet, the Kraken investment appears to be a departure from the BBB’s typical focus. Kraken, a subsidiary of the energy firm Octopus Energy, is hardly a small business. In fact, at its current valuation, it would rank among the FTSE 100’s top 70 companies, surpassing the likes of Sainsbury’s and Pearson.
Moreover, the BBB’s £25 million stake represents just 0.35% of Kraken’s total funding round, which was led by a US-based venture capital firm, D1 Capital Partners. This raises questions about the significance of the BBB’s involvement and whether it was truly the “make-or-break” element for the company’s success.
Business Secretary Peter Kyle has attempted to position the investment as part of efforts to keep Kraken headquartered in the UK, with an eye towards its eventual public listing. However, experts argue that £25 million is unlikely to sway Kraken’s decision on where to list, as the choice will ultimately come down to where the company can achieve the highest valuation.
The BBB has defended the investment, stating that it was an “opportunity too good to miss” and that it aims to generate a financial return for UK taxpayers by exposing them to one of the country’s fastest-growing companies. Yet, this explanation seems to conflict with the BBB’s stated mission of supporting smaller businesses.
The Kraken investment raises questions about the BBB’s evolving role and whether its mandate has been quietly rewritten to accommodate larger, more established companies. With the BBB’s permanent capital now standing at £25.6 billion, following a £6.6 billion boost from the Treasury, it remains to be seen whether we can expect more such investments in firms that have already achieved significant scale and growth.
As the financial landscape continues to evolve, it will be crucial for the BBB to clearly articulate its updated priorities and ensure that its investments remain aligned with its core objective of fostering the growth of smaller businesses in the UK.
