It may well be that NESTA, the UK’s National Endowment for Science, Technology and the Arts, will oversee a £1bn emergency venture capital fund aimed at pre-revenue technology start-up firms. But no-one at the body seems to be answering their email this morning. And email from three of the key “VCs” there (or the equivalent of the people who greenlight investment) is bouncing back. Meanwhile, no words as yet from Nesta chief executive Jonathan Kestenbaum on how this fund actally be managed.
[UPDATE: NESTA eventually got in touch, see comment below]
However, what we do know from the Observer’s report – a handy Sunday newspaper item, which is always a great create way to create political capital for the politician that leaks it – noted that Lord Drayson thinks this new fund will “form the centrepiece of a dramatic shift in industrial policy which will see more intervention from government.” Flourish, flourish!
The cabal that cooked this up was NESTA, PM Gordon Brown, Drayson and Lord Sainsbury.
But is this “new” money or is it existing money which will just be more quickly distributed? The report alluded to “the doubling of government funding for scientific research at universities, which has led to an increased number of spin-outs in IT, biotech, nanotech and green technologies” but that this “will count for nothing if money is not quickly distributed to them.” The devil as always is in the detail. The plan will be “formalised early in the new year”.
Perhaps it is new “real money”? They will be looking for cash from the private sector including private equity, universities and mainstream business. All sectors which will simply be awash with cash in the new year, I am positive… Private equity will of course be falling over itself to invest in schemes which will be overseen by the government’s grey suits and provide little incentive for the Limited Partners that back VC houses. Oh yes.
And yes, ok, so the post-war Labour government created 3i to provide risk capital to growing businesses. But 3i long pulled out of startups. Has no-one noticed this?
Personally I agree with those, like Broadstuff, that advovate the allocation of cash towards early-stage companies, and put what money this fund raises (if any) into small batches which are spread around. In particular should create 2/3 person teams who can build beta companies. These companies will need to pitch, just as they would on the TV show Dragons Den (in fact, culturally Dragons Den may prove more useful than we thought), to a body of people who know startups. Avoid, at all costs, allocating this cash to regional funds administered by pen-pushing civil servants, the woeful Business Links and local authorities.
So, put this cash into beta startups. Put £175,000 into 8 million startups not £2m into a few thousand.