The project sought £20m ERDF support as part finance towards the £50m capitalisation of the Scottish Venture Fund (SVF) running from 2009 to 2014, building on the success of the Scottish Co-investment Fund (SCF). Any returns being repaid to the SVF bank account for future SVF re-investment.
The Scottish Venture Fund was set up in November 2006 to address the early stage equity gap for ambitious young growth companies by: increasing the money supply available to investors and companies seeking risk capital support; and introducing new international institutional investors from outwith Scotland. The Seed, Co-investment and Venture Funds together allow Scottish Enterprise (SE) to start, develop, and grow companies of scale in Scotland.
The Scottish Venture Fund (SVF) will invest £500k - £2million per transaction in high growth small and medium sized companies. SVF invests on a pari passu basis, with SVF Partners at least matching SVF's investment, within a deal ceiling in the range £2 million - £10 million.
The Fund can invest throughout Scotland.
Unlike a conventional venture capital fund, SVF does not find and negotiate investment deals on its own. Instead, it forms contractual partnerships with active VC fund managers, corporate venturers and business angel syndicates from the private sector. SVF also seeks to recruit new, international institutional non Scottish based investors (these include English, Japanese and American investors). In these partnerships the private sector SVF Partner finds the investment opportunity, negotiates the investment deal and offers to invest their own equity cash. If the opportunity needs more money than the private sector Partner can provide or if the scale of risk is such that the Partner wishes to syndicate their investment, then the Partner can bring those opportunities to the SVF team who then determine whether SVF will invest, and on equal commercial terms. If the opportunity needs more money than the Partner and the SVF can provide, then the SVF team will help identify and bring in other SVF Partners to complete the funding package. In summary, the supply of early stage risk capital is significantly increased as well the number of active investors.