The UK government’s Sovereign AI Venture Fund and the British Business Bank have joined a Series C round worth more than £500 million for Fractile, valuing the London and Bristol AI chip developer at over £5 billion, the government announced on 11 November. The investment puts two state-backed institutions alongside private investors financing the company’s hardware development.
Key points
- Fractile’s Series C is worth more than £500 million and values the company at over £5 billion.
- CapitalG, Lightspeed and Redpoint are among the round’s other investors.
- The Sovereign AI Venture Fund typically makes equity investments of around £1 million to £10 million.
- A Budget announcement allocated a further £140 million to Sovereign AI, split between investments and an R&D procurement scheme.
Fractile’s £5 billion valuation and chip plans
Fractile develops chips for AI systems and works across hardware, software and machine-learning research. The government says the company is pursuing hardware intended to run AI faster, use less energy and cost less.
The Series C brings CapitalG, Lightspeed and Redpoint into the same round as the two public backers. Its value of more than £500 million is the amount raised across the round, while the valuation of over £5 billion is the price assigned to Fractile. Both figures were given in the government’s announcement.
Leandros Kalisperas, chief investment officer of the British Business Bank, said Fractile was designing chips to operate faster and at greater capacity. Joséphine Kant, an investment partner at Sovereign AI, described its work across chip design, software and machine learning as an ambitious attempt to compete globally. Their assessments concern the company’s planned technology.
Business Secretary Jonathan Reynolds said Fractile plans to expand its presence in Bristol. The company also operates in London. The government presented the financing as support for developing AI hardware in Britain and retaining more of the work associated with it there.
Sovereign AI’s direct investment in Fractile
Sovereign AI is a government programme for backing UK AI companies through investment and other support. Its Venture Fund invests directly in companies at early and growth stages. The British Business Bank is the UK’s economic development bank; it helps businesses obtain finance and backs venture capital funds.
The government says the Sovereign AI Fund’s typical equity investment is around £1 million to £10 million, although the amount varies by company. It also says the fund does not comment on individual investment figures because it regards them as commercially sensitive. That typical range describes the fund’s own investments, not the size of Fractile’s entire Series C.
AI Minister Kanishka Narayan said the backing was intended to build British industrial capacity in the technology that powers AI. The government says its Sovereign AI-backed startups have a meaningful UK presence, through founders, leadership, an operating headquarters or a substantial share of their staff. Fractile’s London and Bristol operations place this round within that domestic investment programme.
Budget adds £140 million to Sovereign AI
The Chancellor confirmed a further £140 million for Sovereign AI at the Budget a fortnight before the Fractile announcement. Of that amount, £60 million was allocated to the fund’s investments and £80 million to its R&D Procurement Scheme. The government also announced a new Sovereign AI focus on physical and industrial applications, including robotics, autonomous systems and advanced manufacturing.
The same Budget raised the British Business Bank’s investment capacity by £5 billion to £31 billion. The government said the package was projected to sustain more than 24,600 current posts and add more than 15,800 new posts during the lifetime of the finance. Those projections apply to the package, rather than to Fractile’s fundraising.
The British Business Bank has backed more than 150 venture capital and growth funds, according to the government. Its most recent fund investments included £180 million across six AI and deeptech funds.
