Following on from our recent article on the new Business Bank, this is the sixth in a series explaining the various government funding schemes seeking to provide business finance solutions for businesses in the UK.
Enterprise Capital Funds (ECFs)
The Government has a number of interventions which are aimed at bridging the gap in the supply of equity for SMEs seeking up to £10m and to form a key part of their business finance strategy. These will all be brought under the new Business Bank’s supervision.
There are currently 12 Enterprise Capital Funds with committed Government funding of £237m. These have made investment available to SMEs, and helped foster a sustainable skills base in the early stage venture capital market, by lowering barriers to entry for entrepreneurial risk capital managers seeking to channel finance and mentoring to SMEs.
Background
1. Enterprise Capital Funds were established to address a market weakness in the provision of equity finance to innovative small and medium sized enterprises, and are a joint public-private venture. Since 2006 more than £160 million has been invested in over 140 companies. The government’s investment in the funds is currently made and managed by Capital for Enterprise Ltd, an arm’s length body established in 2008 as a centre of expertise to manage the Government’s investment programmes.
2. The Government has committed £200 million for investment into Enterprise Capital Funds between 2011 and 2015, and since May 2010 more than £90 million has been invested in over 70 companies through the programme.
3. Enterprise Capital Funds aim to both lower the barriers to entry for entrepreneurial fund managers wanting to operate in the equity gap, and increase the supply of equity finance to innovative, early stage companies.
4. For more information on Enterprise Capital Funds, visit the BIS website
Up to date
The latest fund, Longwall Ventures ECF, is the second Enterprise Capital Fund run by the Longwall Partners, Michael Penington, Matthew Frohn and David Denny. Their first fund, Oxford Technology ECF, recently sold its investment in Meciria, a company that had developed a directional drilling technology, for a profit of around £8 million.
Longwall Ventures ECF was launched in November 2012 by Michael Fallon, the Business Minister, and is aimed at investing in SMEs with high potential to grow in the science, technology and engineering spaces.
This fund is the twelfth Enterprise Capital Fund and comprises £25 million of Government investment and £15 million from private investors. With this funding, Longwall Ventures ECF are able to invest in funding rounds of up to £2 million to support these growth businesses.
The Minister made the announcement during a speech at Investing for Success: The SEIS briefing, at the London Stock Exchange, where entrepreneurs discussed the Seed Enterprise Investment Scheme (SEIS) which aims to encourage investors to put their money into new firms by offering significant tax breaks.
Rory Earley, Chief Executive Officer of Capital for Enterprise, said at the time:
“We are very pleased to be able to support this second fund for the partners and to work alongside the private investors who are also demonstrating their confidence in the team.
“This team will continue to support the development of technologies which can generate real future growth in the economy.”
More on the SEIS in our next article.
Finding alternative funding
If the continuing lack of availability of funding is affecting your business, please contact us. We are specialists in this field and can hopefully point you in the right direction.
As always, if you have any comments or any of your own experience you would like to share on this subject, please contact me at john.thompson@transcapital.co.uk or on 0845 689 8750.
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