New enterprise fund for UK SMEs
Smaller Internet-focused businesses looking for funding could benefit from a new initiative backed by the European Investment Fund and the UK Government.
Targeting small and medium-sized enterprises (SMEs) with high growth potential, the “Notion Capital 2” fund stands at £62.9 million (€78.2 million), making it the largest of 11 Enterprise Capital Funds so far established by the UK Government. Welcoming the new initiative, the UK’s Business and Enterprise Minister, Mark Prisk, said: “It is absolutely vital that ambitious small firms can access the finance they need to expand and grow, and this new Enterprise Capital Fund will provide at least £40 million of funding to viable UK high-tech businesses.”
The Fund is managed by Notion Capital — a venture capital company with a track record of backing UK and European companies providing software-as-a-service (SaaS) and cloud computing services. According to Notion Capital Partner Jos White, the new Notion Capital 2 fund aims to back companies that Notion believes “can make it big”, while co-founder Stephen Chandler said that the company’s strategy is to only invest in cloud computing and SaaS, with the aim of identifying and supporting European companies that can become global leaders. The Notion Capital 2 fund is also expected to target investment at other types of Internet-based service companies and at businesses which use the Internet to provide their services.
The involvement of the UK Government and the European Investment Fund (EIF) is said to reflect their conviction that the strategy adopted by Notion “can help Europe take its fair share of the Cloud Computing economy”.
European Investment Fund
The aim of the EIF is to support SMEs in Europe by helping them access finance. To that end, the EIF designs and develops venture capital and guarantees instruments specifically aimed at SMEs, with an emphasis on those involved in high-tech developments and in their early stages as companies.
The EIF has investments in more than 300 funds, making it the biggest player in European venture capital. At the end of 2011, it had nearly 160 operations, with guarantees amounting to some €14.7 billion (£11.8 billion). The €20 million (£16 million) committed by the EIF to Notion Capital 2 is provided under the EU’s Competitiveness and Innovation Framework Programme, which seeks to improve access to finance for the start-up and growth of SMEs and to promote investment in innovation.
Enterprise Capital Funds
Enterprise Capital Funds (ECFs) are commercial funds investing in small, high-growth businesses seeking up to £2 million of equity finance. They are intended to “address a market weakness in the provision of equity finance to SMEs by using government funding alongside private sector investment to establish funds that operate within the ‘equity gap’”. That gap is due to a scarcity of equity capital in the £0.5–£2 million (€0.62–€2.5 million) bracket — the sort of amounts which some businesses struggle to raise.
The ECF initiative is managed by the fund management company Capital for Enterprise, which is owned by the Department for Business, Innovation and Skills. In a ground-breaking move, the EIF has collaborated with Capital for Enterprise to structure Notion Capital 2 as an ECF. According to the Chief Executive Officer of Capital for Enterprise, Rory Earley, this latest initiative demonstrates the strength of the ECF programme — which has had a total of £200 million committed to it by the Government until 2014/15.
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