The UK government plans to invest £200m into digital, biotech and advanced manufacturing businesses. It’s put in £100m into the pot, but the other £100m will come from the European Investment Fund. The money will be invested in technology businesses “where there are significant growth opportunities”.
Prime Minister Gordon Brown told the UKTI-organised Global Investment Conference today: “The fund, seeded by the government, is bringing private venture capital to growing enterprises. It is already providing £125m of funding to high-tech, low-carbon businesses. From today, a further £200m will be available for life sciences, digital and advanced manufacturing.” Science and Innovation Minister Lord Drayson said: “Private funds have matched the Government’s investment and money can now flow into promising technology companies.”
Technically speaking that brings the total UKIIF investment to £325m. The UK Innovation Investment Fund was announced last June.
So where did they get the £200m from? The UK Future Technology Fund used £100m of Government funding alongside commitments of £100m from private sector investors, creating a “fund of funds”.
So who is going to manage this? The European Investment Fund and Hermes Private Equity will be the “fund of fund” managers for two separate “funds of funds”. Still with us? This includes the £150m investment from the Department for Business, Innovation and Skills, the Department of Energy and Climate Change and the Department of Health.
The Government has appointed Capital for Enterprise Limited to advise on the development of the UKIIF. They will lead the process of selecting and appointing the investment fund managers.
But of course, the devil is in the detail.
Who is Capital for Enterprise Limited? It’s an “asset management business that designs, implements and manages finance measures to support Small and Medium Size enterprises (‘SMEs’) across the UK.”
It is wholly owned by UK Government through the Department for Business, Innovation and Skills (‘BIS’) and has 17 full-time staff as well as retaining specialist consultants.
So if you’re an entrepreneur, you won’t be dealing with these people. They’ll be selecting the fund managers who in turn will select the VC, who you might get to see.
Problems
Firstly, this initiative is to be welcomed. It’s something rather than nothing.
However, I can immediately see that there are problems. £200m spread across three sectors (biotech, digital and advanced manufacturing) doesn’t go very far. Ask the average biotech company about how much it takes to develop a vaccine – they’ll have £200m for breakfast.
What we’d like to see
A weighting towards digital. These companies can grow faster from a smaller base and require far less investment. The money there could be spread much further.
I just hope that the government’s advisors understand this. Or we will see most of the money gone before it can get to a wider array of companies.
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