How corporate venture capital can transform UK finance and funding
The British Private Equity & Venture Capital Association (BVCA) has today launched a new report which examines the role corporate venture capital can play in funding UK small and medium-sized enterprises (SMEs).
High-growth SMEs that are seeking funding currently face a range of potential investors which are incentivised differently. Current policy treats CVC differently from other forms of equity finance, which forces SMEs to make potentially detrimental trade-offs. Policies which create a level playing field for all direct investors would be of huge benefit to SMEs.
The Missing Piece is based on a series of interviews with corporate venture capital (CVC) investors and makes a number of policy recommendations designed to encourage the growth of CVC and accelerate UK innovation.
Key recommendations include:
- Harmonise rules for early-stage investors – Currently most CVC investors are treated differently to other early-stage investors (such as VCs) under international accounting standards. This creates a range of conflicts of interest for investment partners like VCs and investees like SMEs. Policymakers should advocate for changes to these standards.
- Harmonise incentives for early-stage investors – Current fiscal stimulus programmes for early stage investment such as Enterprise Investment Scheme and SEIS create conflicts of interest for different types of investors. Policymakers should adjust the qualifying rules to allow these programmes to work more effectively.
- Make the UK a global centre for CVC – The UK has all the pieces in place (business environment, laws, culture, etc.) for this to happen. More must be done to promote the UK to corporate venture capital investors.
The report was launched at the BVCA Summit on 17 October.
James Clark, the BVCA’s Policy Manager and author of the report, said: “Corporate venture capital has a vital role to play in the equity-finance market for high potential, high growth SMEs. Unfortunately at the moment it is treated differently from other forms of venture finance putting it beyond all but the biggest corporates. With the right mix of policies the UK has the opportunity to get many more companies involved, expanding the market for venture finance and helping SMEs to grow.”
Notes to editor
- The British Private Equity and Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has over 500 member firms, representing the vast majority of UK-based private equity and venture capital firms and their advisers.
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