UK government to create venture investment fund

The UK government has said it will put £150m into an innovation “fund of funds” that will be invested through venture capitalists in technology companies.

The new fund will focus on investing in growing small businesses, start-ups and spin-outs, in digital and life sciences, clean technology and advanced manufacturing. The government said it will match private investors in the fund in the hope of pushing the total value of the Innovation Investment Fund to £1bn over ten years.

The government spending will come from the Department for Business, Innovation and Skills, the Department of Energy and Climate Change and the Department of Health.

Prime minister Gordon Brown said: “This fund will help build Britain’s future by investing in key sectors. It will provide crucial support for our most promising start-ups and existing small companies when they need it most. Venture-capital finance is the lifeblood of innovation and crucial to ensuring the commercialisation of the discoveries coming out of our research base. The fund will boost future UK competitiveness.”

Lord Mandelson, secretary of state for business, added: “In our New Industry New Jobs strategy we identified access to venture capital as one of the critical factors in developing innovative new companies in Britain.
The UK Innovation Investment Fund will be a shot in the arm for the British venture capital industry. It is also a challenge to UK venture capitalists to follow the Government’s lead in backing British entrepreneurs in building exciting new companies, investing in new technologies and creating jobs.”

Simon Walker, CEO of the British Venture Capital Association (BVCA), said: “The BVCA is immensely encouraged by this venture capital initiative. The model that has been adopted is one which we have championed in our work with the Government leading up to this announcement. The UK Innovation Investment Fund offers an exciting economic incentive for more than a thousand young venture-backed companies and the ideas and jobs which they represent.” 

Richard Pelly, chief executive of the European Investment Fund (EIF), said: “EIF has been working together with the UK Government, the BVCA and other significant players in the Venture Capital sector in the preparation of this welcome new initiative.

“At a difficult time for the VC industry, the UK Innovation Investment Fund will underpin a next round of critically important fundraising for fund managers.”

The UK Innovation Investment Fund will operate on a fund-of-funds structure which means it will not invest directly in companies, but rather invest in a small number of specialist technology funds that have the expertise and track record to invest directly in companies.

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