The UK's Small Business Investment Taskforce has looked into funding for high-tech businesses.
In a very slim document, the Small Business Investment Taskforce, an agency of the Department of Trade and Industry in the UK, makes a few points about "Factors Determining The Performance of Early Stage High Technology Venture Capital Funds". In particular, the SBIT commissioned some research, in cahoots with the Confederation of British Industry, "in order to better understand the current provision of equity capital to SMEs in England".
They sum up this research in their latest annual report. One message that emerges is the importance of public funds. As the report puts it: "Publicly backed venture capital funds accounted for around one third of investments during 2003 and 2004. The publicly backed funds are an important source of capital to the SME sector."
We also read that "There appears to be little disruptive overlap between the investment activities of publicly backed and privately backed funds". No one is complaining that the taxpayers' cash is competing with private funding.
In another bit of research, the SBIT asked the the Stockholm School of Economics to do some work "to better understand the factors that made some early stage high technology venture capital funds successful as opposed to others". This too has some interesting bullet points on venture capital firms:
- Specialized VC firms, focussing on investments in a limited number of industry sectors perform better than generalist VCs with a broad sector focus
- Specialization in early stage phases had a negative effect on returns
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In contrast to US, UK VCs tend to invest primarily in established activities rather than in new technology
The full details of the research are on the SBIT's web site.
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