The UK government is planning to launch a £1 billion (€1.2 billion; $1.5 billion) venture capital fund for high growth technology start-ups, in response to an exodus of venture capital firms from early stage investment.
Details on the exact structure and remit of the fund have not yet been finalised, but a source close to the situation told PEO that confirmation of the fund’s formation is expected within “a matter of weeks”.
Last week Lord Drayson, the minister for science and innovation, said he was progressing plans for the fund. “I am working to see how we can use the levers that the government has to kick start and leverage private sector money to invest in this space,” he said, speaking at an event run by the National Endowment for Science, Technology and the Arts (NESTA).
NESTA, the independent body which initially proposed the fund’s formation, will this week release its recommendations for the fund’s structure. It will propose a fund of funds backed by a government commitment of £500 million, to be matched by private sector investment.
Government money will “provide the credibility and the substantial investment sums needed to bring institutional investors, with their valuable experience, back to the early stage,” says the draft NESTA proposal.
The aim of the fund is to help plug an equity gap in UK early-stage venture, which NESTA says is facing “crisis point”.
The small proportion of UK investment going into early stage – at only 4 percent of total equity investment – is hurting UK spin outs,” said Lord Drayson.
If the new vehicle is funded by a mixture of public and private sector money, it will represent a scaled up version of the government-backed Enterprise Capital Funds, to which the state already commits around £60 million per year.