Venture capital investment dropped by 30pc in 2010

Latest industry statistics reveal that venture capital investment in the latest generation of business bank accounts in the UK dropped by 30 per cent in 2010.

Business loan investment for start-ups declined to just £46 million, down from 2009’s £125 million figure.  Likewise early stage financing, which stood at £303 million in 2009, came in at only £224 million in 2010.

Despite the decline in venture capital figures in 2010, the risk capital industry’s total investment rose from £4.8 billion in 2009 to £8.2 billion in the UK.  This was attributed to an increase in funding from private equity sources for management buyouts, statistics said.

The organisation that compiled the recently released figures, the British Private Equity and Venture Capital Association, remarked that investment through venture capital plays a pivotal role in the stimulation of economic growth.

Earlier this week both David Cameron and visiting US president Barack Obama stated that both the UK and the US were two of the most active venture capital investors in the world.  The two heads of state remarked that they would work in tandem to ensure that high-growth and innovative businesses would be able both create highly skilled jobs and fund their growth through greater access to venture capital.

Venture capital and private equity firms based in the UK invested more abroad than they did at home for the fourth year running, the statistics also revealed.  Approximately £20.4 billion was invested in total in 2010, an increase of almost £8 billion.  £6.6 billion in new money was raised by the firms – an increase of £3.6 billion from the previous year.

The BVCA said that there was a significant increase in buyout activity.  Its research found that the value of buyout deals taking place in the UK rose to £4.7 billion last year, which increased from 2009’s £1.7 billion figure.
This activity helped improve the funds’ potential profits before fees, according to a separate survey by PwC and Capital Dynamics.
Over a three-year period, average returns before fees are now 6.7pc, compared with 2.4pc for total UK pension fund assets and 1.4pc for FTSE All-Share.

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