Innovation funding falls by £100m

Venture capital funding for new technology projects falls £100m

Lack of funding for early stage technology projects

Venture capital (VC) funding for early-stage business technology development is down by nearly £100m because of a lack of financially-viable opportunities.

Investment at the proof-of-concept stage has fallen from £402m in 2006 to £303m in 2007, according to a quarterly report from research group Library House.

The UK has innovative ideas, but money to take them to the next stage is scarce, says Library House analyst Roger Franklin.

‘There are just not enough firms available that will deliver the kind of returns investors are looking for,’ said Franklin.

‘We are calling for money in the form of grants because investment in early-stage research is a loss leader, but we need more in the UK.’

Stewart Davies, of VC firm New Venture Partners, says wariness of investing in early-stage technology is a knock-on from the dot com crash. VCs are more likely to wait until the product is already proven, he says.

‘Through the 1990s there was a get-rich-quick thinking, fuelled by the web, so people are wary of putting money in the proof-of-concept stages,’ said Davies.

‘VC capital comes in when they have made their first sales and they need expansion for developing sales channels.’

James Mallinson, portfolio manager at Isis Innovation – an Oxford University body that helps researchers commercialise their ideas – says investors are becoming more sophisticated, but that venture capital funding is still available.