Vince Cable’s British business bank has increased from £25 million to £50 million the maximum potential commitment that can be made in new Enterprise Capital Funds (ECF).
Set up in 2005, there are now 16 ECFs in existence managed by venture capital firms including MMC Ventures, Passion Capital and Notion Capital.
Alongside the doubling to £50 million for commitments, ECFs can now make investments of up to £5 million in initial funding rounds, rather than the previous £2 million.
The 16 ECFs currently in existence have facilitated the creation of £530 million equity funding and backed 169 British businesses.
Ken Cooper, managing director for venture capital solutions at the British business bank, comments, ‘ECFs have played a very important role in bridging the finance gap and improving access to growth capital for early stage businesses in the UK.
‘The new ECF provisions mean that we can continue for the next ten years to enhance investment capacity at this vitally important stage for growth businesses.’
More on Enterprise Capital Funds:
- Rate drop for Capital for Enterprise on fresh ECFs
- London Business School creates new £30 million ECF
The news comes a week after GrowthBusiness used research conducted by the ICAEW to provide an examination of the ECFs currently in operation, what each is worth and where it is investing. The £321.2 million of government capital provided alongside the £222.3 million of private capital has sought to plug the ‘equity gap’ that exists between early and then later-stage finance.
According to the government, the ‘equity gap’ has been proven to be a structural market weakness impacting companies with viable investment propositions needing to raise modest levels of risk capital.
In 2008, management of ECFs, along with other Department for Business, Innovation & Skill (BIS) equity funds including the Small Firms Loan Guarantee (SFLG), was transferred to Capital For Enterprise (CfEL). When CfEL become part of the British business bank in October 2013, responsibility for ECFs again shifted.
The British business bank has also issued a new guidance document for new prospective managers and will be hosting briefing events for interested parties in the coming weeks.