It has been a bone of contention that the Regional Venture Capital Funds have taken a long time to get approval. Today more evidence emerges as to why that is the case.
But a report from a cross-party group of MPs says the funds have been a "risky and experimental initiative". They also question the measurement of the funds and the impact they have had.
In a report entitled Venture Capital Support to Small Businesses, the House of Commons Public Accounts Committee criticised the level of controls, but also attacked poor coordination between the regional funds and the national venture funds, such as Capital for Enterprise, which tended to favour London and the South East.
The report says: “The department lacks a clear picture of how its national programme of venture capital funds fits alongside other venture capital funds established and managed by Regional Development Agencies (RDAs). The Department and Regional Development Agencies should collate information on the aims, objectives, and amounts invested in the various publicly-supported venture capital funds. The department should use this information, working with other relevant public bodies, to ensure that funds complement each other, that any potential duplication of effort is avoided, and that common objectives are pursued efficiently.”
Tory MP and Public Accounts Committee chairman Edward Leigh said: "This was a risky and experimental initiative and yet, for ten years, the departments made investments without putting in place a robust framework for measuring and evaluating the impact of the funds.
"Whether the investments represent value for money is entirely unclear. The departments in question were remiss in failing to place vital information about the funds in the public domain."
And in words that must have brought a chill down the spine of venture fund managers looking to bid for the Northwest Venture Capital and Loan Fund, there have been spiky comments from Leigh about the fees charged by fund managers.
"Among the many causes for concern in this story are the substantial cumulative fees being paid to the private sector fund managers who manage the funds, even though the performance of the funds has been poor. This has been tantamount to rewarding failure."
Those of us up early this morning to listen to Wake Up to Money will have heard David Hall from YFM making a defence of venture funds, making the point that the time to judge their performance is at the end of their investment cycle, not at a time when values have been depressed due to the recession.
Comment? Email Michael Taylor, editor, Insider