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Venture capital in decline

Article Date:  Mar 05 2009 Research from NESTA
Some ventures are running out of cash
Some ventures are running out of cash

The money raised by venture capital funds plummeted 70 per cent last year compared to 2007, according to research from NESTA, the National Endowment for Science, Technology and the Arts.

Some £179 million was raised in 2008 in contrast to £609 million the previous year as investors lost appetite for higher-risk propositions.

Jonathan Kestenbaum, NESTA’s chief executive, says the drop in funding available for early-stage companies with high growth potential could be deeply damaging for the UK’s economy.

He adds, ‘Many existing companies that are still pre-revenue will die as the cash is not there to sustain them.’

NESTA has called for the creation of a publicly-backed £1 billion venture capital fund to counter the shortfall in investment for innovative, high-tech companies.

Kestenbaum continues, ‘Government has to make the switch from bailing out industries, to investing in growth sectors where future market demand is strong. If we fail to do so, we will be paying the price for many years to come.’

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