Department for Business, Innovation and Skills
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Government’s Uk Innovation Investment Fund Takes Shape

Government’s Uk Innovation Investment Fund Takes Shape

News Release issued by the COI News Distribution Service on 03 August 2009

The Department for Business, Innovation and Skills will today take the next step in setting up the UK Innovation Investment Fund (UK IIF) – a venture capital fund of funds to support the UK’s technology companies – just one month after securing cornerstone investment for the Fund.

Capital for Enterprise Ltd will release the Request for Proposals (RFP) for prospective Fund of Fund managers for the UK IIF. The RFP is a key milestone in delivering the Fund as it sets out the parameters for the fund and details the information expected from prospective Fund of Fund managers.

The RFP will ask potential Fund Managers to target the sectors of the future, such as life sciences, low carbon, digital and advanced manufacturing. Success in these sectors is key to the Government’s industrial strategy set out in New Industry New Jobs, and will create the highly skilled jobs as Britain emerges out of the global downturn. The RFP will also ask Fund Mangers how they will raise money from private sector investors to create the largest technology Fund in Europe.

The UK Innovation Fund was spearheaded by Lord Drayson, Minister for Science and Innovation, to drive economic growth and create jobs by investing 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 strategically important UK sectors including digital and life sciences, clean technology and advanced manufacturing.

The Fund was announced by the Prime Minister on 29 June as part of the Government’s strategy for Building Britain’s Future. The Departments for Business Innovation & Skills, Energy and Climate Change and Health will invest £150 million alongside private sector investment on a pari-passu basis. It is the Government's ambition to leverage enough private investment to create a £1 billion 10 year fund.

The UK Innovation Fund will safeguard the Government’s record investment in science over the past decade by demonstrating the wealth-generating potential of the UK research base. It will leverage substantial private sector investment and will boost the venture capital and syndication markets in the UK at a time when they are most vulnerable.

A seminar for potential investors and Fund of Fund managers has been arranged to explain the Government’s objectives and to clarify the process for setting up the fund. The seminar will take place in the City on 6 August.

Contacts:

BIS Press Office: Laure Thomas, 0207 215 5938, laure.thomas@bis.gsi.gov.uk

For further information or a copy of the RFP please visit http://www.capitalforenterprise.gov.uk/ukiif or email: UKIIF@capitalforenterprise.gov.uk

Notes to Editors

1. The UK Innovation Investment Fund is part of the Government’s plans for Building Britain’s Future. For more details, visit: www.hmg.gov.uk/buildingbritainsfuture

2. All the indicators suggest that the total amount of venture capital invested in early stage technology companies will be significantly reduced in 2009. The UK Innovation Investment Fund will be one of the largest ever technology funds in Europe.

3. Key facts:

There are about 1,093 venture capital backed technology companies in the UK employing over 40,000 highly skilled people.Venture capital backed companies significantly out perform other companiesUK employment increased by 6% compared to a national average of 1%Sales grew by 12% pa compared to 5% for FTSE Mid-250 companiesIncreased R&D expenditure of 12% compared to 1% paValue of exports from the UK increased by 14% compared with 4% nationally69% of venture backed companies introduced new products or servicesHousehold names such as Google, Vodafone, E-Bay, SKYPE, Amazon, Microsoft and Apple were backed at an early stage by venture capital.

4. The 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 only invest in those companies that have strong survival and growth prospects.

5. The Government will seek to appoint an experienced Fund of Funds manager with a proven track record in technology investment. They will be regulated by the Financial Services Authority (FSA) and will require the necessary authorisations to operate in the UK.

6. A Fund of Funds structure proved most attractive to institutional investors, as it creates a portfolio approach that spreads the investment risk across a number of different technology fund management teams. The Fund of Funds approach also enables the Government to support the growth of the market without distorting or competing with existing fund managers and ensures that the Fund complements existing public sector interventions such as Enterprise Capital Funds, RDA European Development VC Funds as well as tax measures.

Department for Business, Innovation & Skills

The Department for Business, Innovation and Skills (BIS) is building a dynamic and competitive UK economy by: creating the conditions for business success; promoting innovation, enterprise and science; and giving everyone the skills and opportunities to succeed. To achieve this it will foster world-class universities and promote an open global economy. BIS - Investing in our future.

Contacts:

BIS Press Office
NDS.BIS@coi.gsi.gov.uk

Laure Thomas
Phone: 020 7215 5938
Laure.Thomas@bis.gsi.gov.uk

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