About the UKIIF
The UK Innovation Investment Fund was announced on 29 June as part of the Government’s strategy for Building Britain’s Future. The Fund has been established to drive economic growth and create highly skilled jobs by investing in businesses where there are significant global opportunities.
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, private sector technology funds that have the expertise and track record to invest directly in technology businesses. By increasing the supply of venture capital to these funds the UKIIF will drive investment in high growth businesses, start-ups and spin-outs which are finding it difficult to raise finance in the current economic climate.
This is a commercial Fund of Funds which will invest in the key areas where Britain has competitive advantages such as: life sciences, low carbon, digital technology and advanced manufacturing.
The Department for Business Innovation and Skills, with the Department of Health and Department of Energy and Climate Change is investing £150 million to cornerstone the Fund and is seeking to secure further investment from private investors both in the UK and overseas with the aim to create the largest technology Fund in Europe which could be worth up to £1 billion over its 12-15 year life.
The UKIIF will mark a step change in UK venture capital through a substantial fund that replicates what the best US fund already do: making investments at all stages, with the kind of scale that can build companies with global reach.
Answers to frequently asked questions can be found here
Background to the UKIIF
There is a long-identified equity gap in the UK - a number of market failures limit the availability of equity funding for smaller businesses as investors concentrate on larger transactions.
Since 2000 the Government has tested a range of different models of investment to help address this. These schemes have provided funds in a variety of forms to hundreds of businesses. The Government doesn’t claim to have ‘plugged the gap’ but it has helped ensure hundreds of valuable investments have been made.
Key to the Government’s developing approach has been to use public investment to attract private funds and to use expert-run specialist funds to make investments.
The development of Government schemes 2000-2009
Government launched its first equity fund in 2000 the UK High Technology Fund followed by the Regional Venture Capital Funds and Early Growth Funds between 2002-2004. They invested in a wide range of businesses across manufacturing, services and high technology sectors.
Following these early schemes and after a considerable period of consultation and reflection on the lessons from earlier schemes, the Enterprise Capital Fund programme was launched in 2005. This is a rolling programme of investments into early stage, often technology-oriented, venture capital funds, typically investing between £1m - £2m into SMEs.
The Capital for Enterprise fund established following the pre-Budget Report 2008 provides equity and mezzanine investments for high-growth companies struggling to raise finance because of the credit crunch.
The UK Innovation Investment Fund provides an additional boost for high-growth, high-tech businesses struggling to raise equity finance. The Government has committed £150m with the aim of attracting significant private sector investment into a fund of funds, to invest into underlying specialist technology venture capital funds.
The UK Innovation Investment Fund has the flexibility to make larger investments than Enterprise Capital Funds, which are restricted to a maximum of £2m.
