Micro Funds identifies the micro fund investment model and experience for both fund and portfolio firms.

Key findings:

• Micro Funds are small venture capital funds, a proportion of which comes from a government source and which specialise in early-stage investing.
• In sponsoring high-risk, early stage funds, Government is seeking other, non-financial results (e.g. the formation of business angel networks). These results should be acknowledged and measured.
• Broader changes to the Micro Fund model to maximise both commercial and non-commercial returns should be investigated.
• Further Government may be necessary to ensure that business angels continue to invest at an early stage.
• Government should aim to create a holistic policy for the creation and support of new technology-based firms.

Micro funds are small venture capital funds worth £30 million in total and invest less than £2 million in each of their portfolio companies.

This research looks at the micro fund investment experience for both the fund and the portfolio companies by addressing the following research questions:

• What is the micro fund investment model?
• What has been the experience of the new technology-based firms?
• What role does micro fund investing play in their financial pathways and why?
• Is government sponsorship of these funds a suitable method of new technology-based firm support? 
• Micro funds are increasingly prominent players in the early-stage equity investment environment but what is the micro fund investment experience for both fund and portfolio firms?

Authors:
Samantha Sharpe, Andy Cosh, David Connell and Hugh Parnell