London-listed funds land £200m from Lynch-backed Featurespace

Two London-listed funds are in line for a cash windfall of more than £200m as the American payments giant Visa closes in on a takeover of a fraud detection company backed by Mike Lynch, the late technology tycoon.

Sky News has learnt that the sale of Featurespace to Visa for about £730m could be announced as soon as next week.

IP Group, which owns a stake in Featurespace of just over 20%, and Chrysalis Investments, which is understood to own about 12%, ultimately stand to reap more than £220m from the sale of another leading UK-based technology company.

Talks between Visa and Featurespace have been ongoing for some time, and were first reported by Sky News in August.

People close to the discussions cautioned that a deal could yet be further delayed.

Founded in 2008 and headquartered in Cambridge, Featurespace was backed by Mr Lynch from its inception.

His death – and of several others, including his daughter – last month on Bayesian, the superyacht he owned, prompted a string of tributes about his influence over the start-ups in which he was involved.

Mr Lynch’s investment firm, Invoke Capital, owns a small stake in Featurespace, while he served as a non-executive director of the company for 11 years.

It is said to have reduced its interest in recent years to help fund the legal case which ultimately saw him acquitted of fraud in a criminal trial over the $11bn sale of Autonomy, the software company he founded, to Hewlett-Packard in 2011.

HPE, its successor company, has said it will continue to pursue billions of dollars in a civil claim against Mr Lynch’s estate.

Featurespace specialises in fraud detection and counts HSBC, NatWest Group and Worldpay among its customers.

Clients outside the banking sector include Betfair, which is owned by Flutter Entertainment.

Demand for its services has grown amid an explosion in financial scams, which have become increasingly sophisticated in recent years, costing banks billions of pounds to refund customers.

It makes Adaptive Behavioural Analytics software, which uses machine learning to detect and prevent fraud in more than 180 countries.

Featurespace, which is run by former Yahoo! and Guardian Media Group executive Martina King, has raised in the region of £100m from investors in a series of funding rounds.

Among its other shareholders are Insight Venture Partners, Mission OG and Highland Europe, some of which rank among the world’s most prominent early-stage investors.

Mr Lynch also played a key role in setting up Darktrace, the cybersecurity company which recently agreed to be taken over by Thoma Bravo, the private equity firm, in a £4.25bn deal.

Visa and IP Group declined to comment on speculation, while Chrysalis could not be reached and Featurespace did not respond to a request for comment.