British Business Bank's Kraken investment sparks mission creep debate
The state-owned British Business Bank (BBB) has long defined its core mission as driving economic growth by helping smaller businesses secure the finance they need to start, scale, and stay in the UK. This mandate has been widely supported, addressing persistent gaps in funding for startups, tech ventures, and university spin-outs across the nation. However, a recent £25m equity investment in Kraken Technologies, a software platform valued at a staggering £6.45bn, has raised eyebrows and ignited a debate over potential mission creep within the institution.
Kraken's scale and funding context
Kraken Technologies, which is being separated from the Octopus Energy empire with plans for a future stock market listing, is far from a small business. At its current valuation of £6.45bn, if it were already listed on the UK stock exchange, it would rank approximately 70th in the FTSE 100 index, placing it alongside major corporations like Sainsbury's and Pearson. This scale directly contradicts the BBB's stated focus on smaller enterprises.
Moreover, the investment comes as part of a broader $1bn fundraising round led by US fund DI Capital Partners, with Kraken boasting recurring revenues of $500m and a valuation multiple of roughly 17 times those revenues. The BBB's contribution represents a mere 0.35% stake in the company, leading many to question whether its involvement was truly necessary or impactful in securing the deal.
Political and strategic implications
Business Secretary Peter Kyle has attempted to frame the investment as a strategic move to influence Kraken's choice of listing venue, amid concerns that the firm, which describes itself as headquartered in London and New York, might opt for a US listing. Kyle emphasised that the £25m was not a bung but part of efforts to retain the company in the UK. However, critics argue that such a small stake is unlikely to sway such a significant decision, with Octopus Energy founder Greg Jackson describing the listing choice as a coin toss between the UK and US, largely dependent on where higher valuations can be achieved.
The BBB has defended its decision, stating that the investment was made with the intention of generating a financial return and ensuring UK taxpayer exposure to one of the country's fastest-growing companies, especially given the majority of investors in the round are international. Yet, this rationale has sparked concerns about a quiet rewriting of the bank's investment mandate.
Broader context and future expectations
This move follows a significant increase in the BBB's resources, with its permanent capital boosted by £6.6bn in last year's Treasury spending review, bringing the total to £25.6bn. Additionally, the bank's limits for direct investments in single companies have been raised from £15m to £60m. These changes suggest that more investments in well-established, scaled-up firms like Kraken could be on the horizon, potentially shifting the BBB's focus away from its original small business support role.
While the profitability of the Kraken investment remains to be seen, it underscores a need for greater transparency and explicit guidelines from the BBB. Without clear rules, such ventures risk blurring the lines of the bank's mission, raising questions about whether taxpayer money is being deployed effectively to support the UK's entrepreneurial ecosystem or merely chasing high-profile opportunities.
