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Government announces £1bn innovation fund

The new scheme will be kick-started with a £150m commitment from BIS, the Department of Energy and Climate Change and the Department of Health. This will be matched by private sector investment.

The government hopes it can leverage enough private investment to build a pot of up to £1bn over the next ten years.

The fund will be aimed at helping small businesses, startups and spin-outs in the digital and life sciences, clean technology and advanced manufacturing sectors.

“This is a challenge to UK venture capitalists to follow the government’s lead in backing British entrepreneurs in building exciting new companies, investing in new technologies and creating jobs,” comments secretary of state for business Lord Mandelson.

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

The announcement has met the approval of both BVCA chief executive Simon Walker, who described the initiative as an “exciting economic incentive for more than a thousand young venture-backed companies”, and Nesta chief executive Jonathan Kestenbaum, who commented that “a fund of funds, avoiding red tape, is the right approach”.

Both Nesta and the BVCA have lobbied for a publicly backed venture capital fund of funds – to stimulate new investment and help existing venture-backed businesses through the downturn – for over a year.

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