Regional development agency Advantage West Midlands has started a hunt for the region’s top venture capital managers to manage a new £45m business support fund.
AWM has put out the call to Birmingham’s financiers after backing was confirmed for the fund that would make the agency one of the biggest local business lenders in the region.
The new fund replaces a tranche of lending schemes which have been wound up after investing £53 million investment in over 200 businesses over the past 10 years.
They are aimed at supporting small businesses in the West Midlands who have fallen into a “funding gap”, and are struggling to raise money from more traditional sources. The new funds will largely deal with businesses looking for funds in the region of £300,000.
A spokesman for AWM said: “Successful SMEs are the lifeblood of the economy and they need appropriate sources of risk capital if they are to start up and develop to achieve their potential.
“This is particularly the case if businesses are to make the most of the opportunities available as the economy recovers.
“Many businesses have benefited from our earlier range of venture capital funds and this new range of venture capital funds will ensure that entrepreneurs and existing companies continue to have access to this important form of finance.”
The £44.8m is spread across:
* An early growth fund of £8m;
* A growth equity fund of £9.2m, matched by the same amount from the private sector, and;
* A mezzanine fund of £9.2m, also matched by the private sector.
The public sector parts of the fund are provided by AWM and the European Regional Development Fund.
AWM had to re-evaluate its budget recently when funding from central government was cut and its own income dropped because of the recession. The agency chose to focus its money on business support rather than regeneration when cutting back the budget. This meant a number of regeneration projects receiving cuts to funding so the agency could keep money getting to businesses.
It has set a deadline of September 16 for aspiring public sector financiers to manage the region’s investment fund. Previously, it was managed by a host of names from the local finance scene, including Midven and Catapult.
The incoming fund managers have to be responsible for raising the match money from the private sector, and dealing with the businesses applying for funding. They have to make sure the fund brings in a profit, and get a performance-related bonus as part of the remuneration package.
There is also a list of industries that are banned from receiving money from the new fund, including retail, banking, coal and steel.
AWM said some of its existing venture capital funds, including the Mercia Technology Seed Fund and the Advantage Enterprise & Innovation Fund, still had money to invest, and would continue to run even after the new fund were in operation.
