UK Government puts £200m into high-tech – but it's spread pretty thin

Next Story

How Random Is Microsoft's Random Browser Choice Screen In Europe?

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.


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.

  • Greg

    As a UK taxpayer, I’d prefer to see that £325m returned in tax cuts or used to pay down the deficit!

    There is no shortage of private venture capital funds available for good prospects – indeed many VCs argue there is too much capital chasing too few returns.

    Fred Destin for example:
    And Fred Wilson:

  • UK Government puts £200m into high-tech – but it's spread pretty thin – ReLogical

    […] original post here: UK Government puts £200m into high-tech – but it's spread pretty thin You can leave a response, or trackback from your own site. Printed from: […]

  • John Bradford

    I’d rather see that money distributed in £50k – £500k pots to start-ups / entrepreneurs in seed funding a la Seedcamp (or even just lottery style handouts, lets face it, on a UK debt of £848bn throwing another £325m away isn’t going to break the bank and if it launches 6,000 high tech companies I’d rate that as a good investment, even if only 10% survive and grow).

    Governments make poor VC’s, and I’m not convinced that fund managers on public sector contracts are any better? Do the people within Capital for Enterprise Ltd have better track records than existing VC/Angels?

  • Jouko Ahvenainen

    I agree that it is good to get money for startups, but it is really an issue, how to invest it. There are different kind of models to make this in Europe. For example, Finland and Ireland use a lot of money to make startup funding. And actually a lot of that money is really distributed to early phase companies (50k to 500k). Unfortunately it is often allocated for technology development only, and companies that have good tech stories get it regardless of commercial opportunities. Some people also see that this kind of money can cause problems, when companies can lose the real commercial focus. It can also be bad that too many companies can get funding and survive too long. VC funded firms typically can also get more funding long time without real success, when VC’s always try to keep them alive to make an exit (and many of those exits are not commercial success but are better for VC fund’s PR purposes).

    American and Israeli model is to make it faster and also dump it faster, if it doesn’t work. But it is not only about money, it is also about attitudes. I think we have a lot of things to learn from Asia, the US, and Israel, how an entrepreneur must really think big and be hungry. Attitude is often as important as or more important than money.

    When we have now thought new startup funding models at Grow VC, our one starting point has been that a company could start with small funding steps (e.g. 50k), but make it easier to get more when the company make commercial progress. And when we can have more effective market for this, companies that really make progress can also get enough money.

  • Underbelly » Daily News update

    […] UK Government puts £200m into high-tech – Good times! But it’s spread pretty thin. Bad times. […]

  • Reshma

    Fully agree on the government taking a fund of funds approach. Problem is that all private equity is regarded equally, whereas early stage investing (a la Seedcamp) is very different from traditional venture capital which is very different from late stage private equity. Even Fred Destin or Wilson will argue there’s not enough funding in UK at the very risky very early stage. We’d like to see more transparency on these FoFs and an easier way to get access to them

  • led display
  • Charles Nouÿrit

    I’m so sorry to hear that guys, in France the government just put €4.5 bilions that would be spread through different tenders made by them.

    My company ( Certified) just got its share of it ;)

blog comments powered by Disqus