Business Growth Fund 'ticks the boxes'

The long-awaited Business Growth Fund launched today in Birmingham. The BGF has been created to fill the "equity gap" faced by so many British start-ups. Supporting these, it is hoped, will boost the economy through innovation and job creation.

Five banks have come together to commit £2.5bn to invest in growing UK businesses with revenues of £10m to £100m. It will invest £2-10m per deal and take an equity stake of at least 10% as well as a seat on the board. The ultimate aim of the BGF is to support fledgling businesses that often fall below the radar of more institutional venture capital funds.

That it is not a purely institutional endeavour has some raising eyebrows as to its prospects. Schemes to address SMEs exist across Europe, and have been met with limited success (see next page). However proponents point out that, unlike some other initiatives, it is able to attract top-notch professionals.

"Government-backed initiatives are crucial - but it is also crucial they are run with investment people who know what they are up to, and that their remit makes sense. The BGF ticks both these boxes." - John Holloway, Director, EIF

"The BGF is being run by people with a good, clear view of the market," says John Holloway, director of investment at the European Investment Fund. "3i served this bit of the market some years ago, but now there is absolutely a gap there," he adds. In fact, the BGF has just named former 3i Birmingham head Richard Bishop as its new head of investments.

Holloway continues: "Government-backed initiatives are crucial - but it is also crucial they are run with investment people who know what they are up to, and that their remit makes sense. The BGF ticks both these boxes."

The investment criteria have some wondering whether this space isn't already served by the British venture capital trust community, a tax-efficient way of investing set up by the government in 1995 to pump money into VCTs. But VCT professionals cite the BGF as more of a complement than a competitor, pointing out that the overlap is minimal and mostly at the bottom end of the BGF's remit. In fact the BGF may even stimulate dealflow by creating more of a market. The VCT sector raised £365m in the latest tax year.

The banks supporting the initiative are Barclays, HSBC, Lloyds, RBS and Standard Chartered.

Other countries across Europe have adopted similar state-based funds. Read on for more information on attempts to stimulate small businesses across Europe.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Venture
• UK / Ireland
• Investments
• 3i