The UK’s “modest” levels of corporate venturing activity risks being further eroded due to a failure of policies, according to a report by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA).
The current state is mixed, according to the RSA report, Corporate Venturing in the UK commissioned from Global Corporate Venturing. It said: “Corporate venturing is showing itself to be an effective way of channelling foreign investment into the country and as an approach which offers greater diversity and longer timeframes for investments than the ailing conventional venture capital sector. However, the scale of corporate venturing in the UK remains modest. Few deals reach the scale judged to be the most efficient size for venture capital.”
The UK’s 78 deals in the July 2011 to June 2012 period was less than 10% of the US’s 835 investments even though the British economy, at nearly $2.5 trillion, is a sixth of the $15 trillion American gross domestic product.
However, while the American deal acitivity posted a 20% increase from the 694 US deals in the prior 12 months, deals in the UK increased by 80% from the 43 deals in the July 2010 to June 2011 period, primarily as more overseas units arrive to pick up assets most local VCs seem unwilling to recognise as promising businesses.
Despite this increase, however, the corporate venturing leaders surveyed for the report said key barriers remained in the UK, including access to suitable and high volume deal-flow, the regulatory framework and the UK government not as proactive in its support for corporate venturing as overseas.
As a result, the report recommends a number of measures policymakers could consider as ways of strengthening the ecosystem to encourage and support corporate venturing, such as a venture connectivity forum, a co-investment fund and fiscal incentives, including restarting the Corporate Venturing Scheme, wound up by the last government.