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UK government unveils plans for £1bn venture capital fund of funds

30 Jun 2009

The UK’s venture capital industry will receive a much needed boost as the government announced plans to commit £150m (€177m) to a new fund of funds, the UK Innovation Investment Fund.

The Department for Business, Innovation and Skills, with the Department of Energy and Climate Change and the Department of Health, will invest the money alongside the private sector in order to stimulate growth.

The government believes this could leverage enough private investment to build a fund of up to £1bn (€1.18bn) over the next ten years. The UK Innovation Investment Fund forms part of the government’s strategy for Building Britain’s Future.

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 just 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.”

Science and Innovation Minister Lord Drayson, who has been a champion for the fund, added, “We must safeguard the government’s record investment in the science and research base over the past decade. We cannot afford to lose out on the wealth this investment can yield and we will need this wealth to continue our sustained investment in research.”

The UK Innovation Investment Fund will invest in a small number of specialist technology funds that have the expertise and track record to invest directly in companies. The fund will provide a cost effective solution that provides a market return to both private sector investors and the government.

The latest vehicle builds upon the previous UK High Technology Fund structure that was announced in 1998. This was a £125m fund of funds and invested in a number of specialised technology funds such as Advent, Amadeus, MTI and Scottish Equity Partners. The government provided a cornerstone investment of £20m, whilst the fund manager was able to leverage an additional £105m from the European Investment Fund, UK pension funds and a French bank.

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