By Daniel Hunter

Small businesses with high potential to grow have been given a £40 million boost today (Friday).

Business Minister Michael Fallon announced the launch of a new Enterprise Capital Fund (ECF) to invest in science, technology and engineering-based small and medium sized enterprises (SMEs).

The new fund, Longwall Ventures ECF, is the twelfth Enterprise Capital Fund and comprises £25 million of Government investment and £15 million from private investors. With this funding, Longwall Ventures ECF will be able to invest in funding rounds of up to £2 million to support these growth businesses. The Government’s investment in the funds is made and managed by Capital for Enterprise Limited, the Government’s investment company.

The Minister made the announcement during a speech at the Investing for Success: The SEIS briefing, at the London Stock Exchange, where entrepreneurs discussed the Seed Enterprise Investment Scheme (SEIS) which aims to encourage investors to put their money into new firms by offering significant tax breaks.

Business and Enterprise Minister Michael Fallon said:

“We are determined to make the UK the best place in Europe to start, finance and grow a business.

“Helping entrepreneurs to access a diverse range of finance options is vital.

“The new £40 million Enterprise Capital Fund will address a gap in the market and help our small businesses find the finance they need to realise their potential.

“And we are also taking action to encourage more investors to bank roll small businesses. Today’s event with entrepreneurs and investors at the London Stock Exchange was an important opportunity to drive take up of the Seed Enterprise Investment scheme. The scheme reduces the risk of these types of investments, and offers significant tax benefits.”
Michael Penington, a partner of Longwall Ventures, said:

"We are delighted to announce the launch of Longwall Ventures ECF, and are excited about the opportunity we have to create strong companies from the UK's excellent science and engineering base.

“Difficult economic times present opportunities for disruptive technologies, and we are very pleased to have investors that share that vision. The ECF programme has been crucial for us in attracting private investment and raising a fund that has the scale to commercialise such disruptive technologies. We are delighted to be continuing our relationship with Capital for Enterprise.”

Rory Earley, Chief Executive Officer of Capital for Enterprise, said:

“We are very pleased to be able to support this second fund for the partners and to work alongside the private investors who are also demonstrating their confidence in the team.

“This team will continue to support the development of technologies which can generate real future growth in the economy.”

Enterprise Capital Funds were established to address a market weakness in the provision of equity finance to innovative small and medium sized enterprises, and are a joint public-private venture. Since 2006, more than £160 million has been invested in over 140 companies.

Doug Richard, investor, entrepreneur and founder of School for Startups, also spoke at the London Stock Exchange about the benefits of the SEIS following a national road show to 3,000 entrepreneurs and investors in eight cities around the UK. The Government’s enterprise tsar, Lord Young, has been working with Doug Richard to increase awareness of SEIS amongst the investor community including a new SEIS information website.

Doug Richard said:

“In today’s tough climate, business owners need to look beyond the banks and traditional investment avenues when looking for funding to grow their business. The Seed Enterprise Investment Scheme is a breakthrough tax incentive which encourages investment in small businesses by reducing the risk to potential investors.

“Today's event will showcase why SEIS is such a radical incentive for investors and will involve entrepreneurs who have successfully raised significant sums through the scheme to accelerate the growth of their businesses.”

The event highlighted how SEIS was already making a difference to UK SMEs including Gloople, a social sharing ecommerce platform who received £130,000 through SEIS, and G’NOSH a gourmet dips company.

The Minister also discussed how a new SME Finance Guide will help small businesses understand the different types of finance available to them. The guide is produced by BIS in partnership with the Institute for Chartered Accountants for England and Wales (ICAEW). It gives comprehensive details on funding options such as:

- Debt finance
- Equity finance
- Commercial mortgages, leasing and complementary sources of debt finance
Mezzanine finance.

Alexander Justham, CEO London Stock Exchange plc, said:

“Effectively funding our fastest growing and most dynamic companies is crucial to nurturing the UK economy back to strong, sustained growth.

“Creating an equity financing ladder from Seed Enterprise Investment Schemes, angel investors through to IPOs on public markets will help us create a resilient, growth-orientated ecosystem in which our most ambitious small companies can thrive.”

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