This report analyses the impact of investment from UK government-backed venture capital schemes on funded firms over the period 1995-2008.

Key findings:

• The current ineffective capital market for young, high impact firms should be seen as a result of a ‘thin market’ where limited numbers of investors and growth firms have difficulty finding and contracting with each other.
• Effective policy solutions have to address more than just the provision of a greater supply of finance: how this finance is provided and the number of venture-ready firms matter too.
• The UK is increasingly well positioned to exploit improvements in the financing of high-potential firms and there is good reason to expect more positive outcomes in the future.

‘Hybrid' venture capital schemes backed by both private and public sector funding play an increasingly important role in the risk capital funding of early-stage firms with the potential for significant growth.

We analysed the impact of investment from six UK government-backed venture capital schemes on 782 funded firms over the period 1995-2008.

The six schemes that are the focus of this analysis are the Enterprise Capital Funds (ECFs), Early Growth Funds (EGFs), Regional Venture Capital Funds (RVCFs), Scottish Enterprise-backed Funds, University Challenge Funds (UCFs), and Welsh Hybrid Funds.

Author:
Nesta