NESTA calls for £1 billion government VC fund to boost creative innovation

Nick | 10 Dec 2008, 16:20

In its paper, “Attacking the Recession“, published this week, the UK’s National Endowment for Science, Technology and the Arts (NESTA) proposed the creation by the UK government of a £1 billion venture capital fund for high-growth, high-risk, high-tech sectors including video games, software and digital effects.

The report argued that this was the right response to the credit-crunch:

“New-to-the-world, invention-based innovation is likely to be the first casualty. Corporate R&D budgets will be cut and the development of new products may be put on hold.”

Many working in the creative industries believe that, even during more benign market conditions, there is a systemic failure in the global capital markets, which are unable to properly evaluate risk in creative business.  As a result, sectors such as media and entertainment are still heavily reliant on investment from sources within industry and by high-net-worth individuals.

Large-scale companies, such as the media conglomerates, help investors to spread risk, but there are relatively few non-US companies which have built the necessary critical mass to attract institutional investors. 

This Catch-22 is a key challenge facing the growth of the creative economy and one which c&binet will seek to address.