The National Endowment for Science, Technology and the Arts (Nesta) has discovered this week that innovative high-tech start-ups on which the UK depends for half its jobs are not receiving a satisfactory amount of external investment.
The research has uncovered a 40 per cent decline in venture capital activity in the past two years. The statistics also show that 2009 was a record low, with only £677m worth of investments raised compared to £930m in 2008.
Nesta stated, "The number of exits has fallen by 40 per cent and fundraising dropped by over 50 per cent, both in terms of the number of funds raising new capital and total amounts raised."
Nesta has commented that both the recession and the banking crisis contributed to limiting capital. "Current fundraising is considerably lower than levels seen after the dotcom crash and consequently the lowest level seen in the past decade," a spokesperson commented.
Despite this, Nesta have said that funds that did manage to cash out did so with good returns, as well as predicting that many investments made between 2004 and 2007 in new companies should bear fruit soon.
Mike Lynch, Nesta's investment fund chairman says that high growth technology start-ups are critical to the UK's recovery.
He argues:"These businesses depend on venture capital for pre-revenue finance. Our ambition to rebalance the economy must take into account the difficulties of early-stage investment."
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