"These venture capital
funds help small, often innovative, businesses that otherwise may
have struggled. And there is evidence that some businesses have
benefited from this support. But, in the absence of clear
objectives and baselines from the start, coupled with poor
financial performance to date of early funds, the Department’s
programme cannot currently be said to demonstrate value for money.
Finally, there is no information publicly available about the
funds. BIS should be more transparent, without compromising
confidentiality."
Amyas Morse, head of the National Audit Office, 10
December 2009
Venture capital funds injected by government into young
companies can provide benefit to them, allowing them to raise
finance not available through conventional means and to grow. But
so far the funds have not been managed as a programme and lack a
robust framework of objectives to measure performance, according to
a report published by the National Audit Office today. In the
absence of baselines for measuring benefits, and with evidence of
poor financial performance from some of the early funds, the
programme cannot currently be said to demonstrate value for
money.
Since 2000, the Department for Business, Innovation and Skills
and its predecessors have invested around £338 million in a series
of venture capital funds to support young companies, which may find
it difficult to obtain funding elsewhere. Nearly half of these
businesses were not confident that they would have been able to go
ahead anyway without finance from the Department's funds. Of those
that felt they would have gone ahead, most felt that in doing so
their activities would have been more limited or delayed.
Today's report points out that the Department failed to
establish a robust framework, and associated baselines, against
which to measure the impact of the funds: objectives were not
clearly set out or prioritized. It was therefore not in a position
to judge whether the taxpayers' investment offered value for money.
The Department, however, is now planning to take steps to
strengthen its programme management and evaluation so that it is
better able to demonstrate value for money.
Improvements have been made to the design of more recent funds
to strike a better balance between protecting taxpayers' interests
and attracting other investors. The recent creation of Capital for
Enterprise Limited, a company wholly-owned by the Department, has
the potential to strengthen oversight of the funds.
The taxpayer is unlikely to receive financial returns on
investment from the early funds. The £74 million invested in the
Regional Venture Capital Funds, for example, is currently valued in
the Department's accounts at £5.9 million and the Department will
get a financial return only if the individual funds outperform the
preferential 10 per cent return to other investors. The economic
benefits derived from the programme have yet to be measured.
Publication details:
HC: 23, 2009-10
ISBN: 9780102963304