Mighty oaks from little acorns grow?

30 June 2009

The UK Government has launched an investment fund which, from small beginnings, could help technology led companies in Britain grow their way out of recession, especially if they are involved in ecologically-friendly industry. Prime Minister Gordon Brown has announced the creation of the UK Innovation Investment Fund to invest in technology-based businesses with high growth potential.

From little acorns

The new fund will focus on investing in growing small businesses, start-ups and spin-outs, in digital and life sciences, clean technology and advanced manufacturing. The Department for Business, Innovation and Skills, with the Department of Energy and Climate Change and the Department of Health, will invest £150 million alongside private sector investment on an equal basis.

Compared to the massive banking bail outs seen in recent months, the government contribution seems small but it is the administration’s belief that this integrated approach could generate enough private investment to build a fund of up to £1 billion over the next 10 years. The UK Innovation Investment Fund forms part of the Government’s strategy for Building Britain’s Future.

“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,” said Brown. “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, commented: “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 operate on a Fund of Funds structure which means it will not invest directly in companies, but rather invest in a small number of specialist technology funds that have the expertise and track record to invest directly in companies. The fund is intended to provide a cost effective solution that provides a market return to both private sector investors and HM Government. It is expected that the companies which will take advantage of the fund will include clean technology, bioscience and advanced manufacturing companies.