This week the Government launched a new £150m ‘UK Innovation Investment Fund’ for high-growth technology businesses. Rather than investing directly, the fund will pump money into other specialist high-tech funds, which will then distribute the bounty to the businesses. Reaction has been broadly positive – but will it be enough for Gordon Brown and co to win back the hearts and minds of the start-up community?
Hopes were raised by the Chancellor’s Budget promise to create a £750m ‘Strategic Investment Fund’, which would focus on emerging technologies and ‘regionally important sectors’ such as digital and biotechnology. This fund’s a little smaller – but the Government says it expects the fund to be matched by private investment, and could eventually add up to £1bn over the next 10 years (sounds like classic PPP maths to us).
'This fund will help build Britain’s future by investing in key sectors,' boasted PM Gordon Brown. 'It will provide crucial support for our most promising start-ups and existing small companies just when they need it most.' Indeed – although owner/ managers might argue that the Budget’s failure to cut small business corporation tax, postpone the hike in employers NI or freeze redundancy pay wasn’t exactly a big show of support for SMEs…
Michael Smith, founder of Mind Candy, which has recently closed a round of funding, told MT that the news was largely positive for the entrepreneurial community. 'This is good news for start-ups because it helps put extra cash into the VCs in London - some of which have struggled - so they can make more investments,' he said.
The Government has come under fire for not acting quickly enough, but arguably something is better than nothing. 'A lot of people thought the billion dollar announcement that’s been bubbling away was just a lot of hot air, so this is a positive step in the right direction,’ says Smith. ‘However, there are still a few question marks in terms of exactly how it will play out.' The (possibly optimistic) hope is that since the investment decisions will be left to professionals, there should be a better chance of backing winners.
But while the fund has been largely welcomed by the entrepreneur community, the feeling is that more could still be done to help early-stage businesses. Like additional tax breaks, for example - in France, a law recently brought in by President Nicholas Sarkozy to make it easier for private individuals to invest in start-ups has been a huge success.' That is what’s still missing,' says Smith. 'More clever tax breaks from the government to help angels could be very beneficial.' But we're not sure the Treasury can really afford to be doling out tax breaks at the moment...
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