The UK prime minister has announced the creation of the UK Innovation Investment Fund to invest in technology-based businesses with high growth potential.
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, together with the Department of Energy and Climate Change and the Department of Health will invest £150m 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 £1bn over the next 10 years.
Gordon Brown, the prime minister, said: ‘This fund 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 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.
This is not a novel approach and it 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, which the fund manager was able to leverage an additional £105m from the European Investment Fund, UK pension funds and a French bank.