Help Still There to Move Firms into Bigger League; Business Focus in Association with RBS Will Venture Capitalists, and the Investment They Make in Growing Companies, Be Hit by Bad Publicity Surrounding Private Equity Investors? Iain Laing Asks the Experts
Byline: Iain Laing
FAT cat private equity investors are in the firing line for making obscene profits at the cost of jobs in some of the UK's biggest companies.
The negative publicity has encouraged the Government to act but, although new Chancellor of the Exchequer Alistair Darling has stated there will be no knee-jerk reaction, industry insiders are worried that the good work of the UK's venture capitalists will be hit in the crossfire.
Private equity and venture capitalists are very different beasts. Private equity firms look to buy big companies and break them up into parts and sell them for a profit. Venture capitalists on the other hand are taking big risks, often with their own money, to invest in small and growing businesses - and as such are critical for future UK growth.
Evidence comes in the sheer number of venture capital-backed companies currently operating in the UK. This month a UBS Wealth Management-sponsored report Funding Growth in a Changing World: The UBS UK Venture Backed Report 2007 shows there are 1,668 such businesses.
The report also shows that a staggering pounds 1.4bn of institutional capital was invested in UK venture-backed companies in 2006, up 27% on 2005.
So what is happening on the ground and what impact will recent damning news headlines have on entrepreneurs and businesses looking for investment?
Chief executive of Tyneside's NEL Fund Manager Barrie Hensby said: "There's no shortage of quality businesses out there in the North-East looking to secure investment finance to fund their growth plans or bring new products to market.
"Although there is some evidence that many businesses with growth potential are prevented from raising the finance they need because they are not in a position to put a coherent investment proposition to potential investors, we would encourage any businesses looking for investment of up to pounds 500,000 not to despair at the perceived lack of available funding in the region."
Yet the UBS Wealth Management report is mildly cautious about where the trends are heading. Paddy Lewis, investment director at the wealth manager's North-East office, said: "The first quarter of the year is historically a busy period for venture capital investment, but the report indicates that this has been relatively quiet in 2007, suggesting that this year we could see a total level of investment of just pounds 1bn, similar to the 2003 level.
"Although not exactly a gold rush, pounds 1bn remains a healthy amount and the difference this money is making to some of the UK's small firms is critical - for many it is the difference between growing and stalling. …