The government has announced the creation of a UK Innovation Investment Fund with a remit to invest in technology-based businesses which exhibit high-growth potential - such as the nanotechnology and life sciences sectors. With £150million invested initially by the Government, it is hoped enough private sector investment will be leveraged in the next ten years to create a venture capital fund worth over £1billion.
Science and Innovation Minister, Lord Drayson, said the fund will help the UK to capitalise on its public R&D spending, “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 new fund will focus on investing in growing small businesses, start-ups and spin-outs in advanced manufacturing, digital and life sciences anc clean technology. 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 known as pari-passu. It is the Government's belief that this could leverage 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 long-term growth strategy titled 'Building Britain’s Future'.
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 will provide a cost effective solution that provides a market return to both private sector investors and HM Government.
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.”
Lord Mandelson, Secretary of State for Business, added “In our New Industry New Jobs strategy we identified access to venture capital as one of the critical factors in developing innovative new companies in Britain. The UK Innovation Investment Fund will be a shot in the arm for the British venture capital industry. It is also a challenge to UK venture capitalists to follow the Government’s lead in backing British entrepreneurs in building exciting new companies, investing in new technologies and creating jobs.”
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