Venture capital support to small businesses : the Department for Business, Innovation and Skills

Since 2000, the Department for Business, Innovation and Skills (BIS) and its predecessors have invested around GBP 338 million in a series of venture capital funds to support young companies, which may find it difficult to obtain funding elsewhere.

Nearly half of these businesses were not confident that they would have been able to go ahead anyway without finance from the Department's funds.

The Department failed to establish a robust framework, and associated baselines, against which to measure the impact of the funds: objectives were not clearly set out or prioritized.

It was therefore not in a position to judge whether the taxpayers' investment offered value for money.

The Department, however, is now planning to take steps to strengthen its programme management and evaluation so that it is better able to demonstrate value for money.

The taxpayer is unlikely to receive financial returns on investment from the early funds.

The GBP 74 million invested in the Regional Venture Capital Funds, for example, is currently valued in the Department's accounts at GBP 5.9 million and the Department will get a financial return only if the individual funds outperform the preferential 10 per cent return to other investors. The economic benefits derived from the programme have yet to be measured.