Private Investors Help Firms Fund 13,000 New Jobs

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Private investors pumping cash in to companies through venture capital schemes have created almost 13,000 new jobs last year.

Investors take advantage of tax breaks offered by the Seed Enterprise Investment Scheme (SEIS), the enterprise investment scheme (EIS) and venture capital trusts (VCT).

Looking at VCT investment for 2012, the Association of Investment Companies (AIC) has published a report examining private investment and the benefits to the UK economy.

Besides job creation, the report highlights:

  • £145 million was ploughed into 78 first-time investments
  • The average investment was £1.81 million
  • £211 million topped up investments already made with 160 companies

The report also confirmed each new investment triggered the creation of an average 52 new jobs.

Long term investments

Ian Sayers, the AIC director general said: “Our report reflects that government backing for venture capital trusts has delivered good results.  Venture capitalists are filling a financial hole, funding innovation and creating jobs in these challenging economic times.

“Linking funding and the wealth of business knowledge that venture capitalists possess is allowing businesses and the general economy to reap rewards.”

VCT investors were also profiled in the report.

They were characterised as long-term players willing to hold on to their investment for at least six years, while many stay with their investment for 10 years or more.

In just under 8 out of 10 investments, the investor has a representative sitting on the company’s board who offered business and finance experience.

Private investors are filling a void left by banks pulling back from commercial finance. For example, private investment provided an average £1 million to a third of companies to fund research and development in 2012 that would otherwise have stayed on the backburner due to lack of finance.

Missed opportunities

Technology and IT companies were the biggest winners from VCT investment, with the sector creating 3,126 new jobs.

Other sectors that benefitted were hospitality and leisure (2,340 jobs), business services (2,300 jobs) and healthcare (2,050 jobs).

Most of the new jobs went to London (4,100), although the North West, Midlands, East Anglia, South East, South West and Scotland also saw more than 1,000 new jobs as a direct result of VCT investment.

Meanwhile, start-up firms in London’s Tech City are bemoaning a lack of finance in a separate report.

Bosses rue missing ’significant business opportunities’ because of a lack of finance. The Tech City Futures Report confirms 23% of firms have had problems with capital raising, while 43% have managed to find funding.

The report says firms find money from angel investors, VCTs and personal loans to directors.

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