UK capital fund programme jumps ahead

The UK government has announced the formation of two further Enterprise Capital Funds, bringing the total number of funds set up this year to six, one more than it intended to set up in the first phase of the programme.

Over £40 million of the total of £67.5 million raised by the two new ECFs comes from the government. The funds are designed to fill the equity gap between seed funding and formal venture capital rounds, investing between £500,000 and £2 million.

The two Enterprise Capital Funds (ECFs) announced this week are:

• The Dawn Capital Fund, with £37.5 million, of which £25 million comes from the government, has been set up by a group of entrepreneurs and fund managers. It will invest across the UK with a focus on traditional industries where pioneering companies are able to adopt innovative technology to improve products and services.
  
  
• The Midlands Enterprise Capital Fund, a £30 million generalist find with £18 million of government money. The fund will concentrate on investing in the Midlands region of the country, but will consider opportunities elsewhere in the UK.

The Midlands fund is the only Enterprise Capital Fund to have attracted backing from institutional investors, in this case local authority pension funds.

David Quysner, chairman of the Capital for Enterprise Board set up to advise on bids to set up the funds said “The institutional backing that the Midlands ECF has secured proves that this programme can attract larger investors, whilst the Dawn Capital Fund demonstrates that ECF support can provide the catalyst for experienced investors to create new fund management teams to invest in the equity gap.”

The first two ECFs were announced in the UK Budget on 22 March, the next two on 22 May.