An assessment of the business impacts of the UK’s Enterprise Capital Funds

Abstract

Recent European studies present persistently critical views of the under performance of government-backed venture capital (GVC) schemes when compared to their private sector counterparts. However, they assess the performance of outmoded funding models and fail to contextualise the economic development role of these schemes. This paper provides a contemporary assessment of the business impacts of the UK government’s flagship Enterprise Capital Funds VC scheme in addressing the sub-£2 m equity finance gap facing young potential high-growth businesses requiring investments. Supply and demand-side evidence is presented from interviews with ECF fund managers, alternative private VCs, industry experts and surveys of successful and unsuccessful scheme applicants. We find that, despite the limitations of mid-scheme evaluation, Enterprise Capital Funds are addressing the UK equity gap and delivering business employment, revenue and innovation impacts. However, further progress is required in order to achieve optimal business exits and sustainable early stage private VC system impacts.