North West Fund has "better structure" than forerunners, says Leach

THE new £185m North West Fund should create a legacy that will be able “not only to support one generation of entrepreneurs but also the next one,” according to Andy Leach, the chief executive of North West Business Finance.

Speaking at the fund’s launch last Friday, Leach said that he expects it to deliver a Gross Value Added benefit of around £700m to the region once all of its investments are realised, through investments in around 800 SMEs.

“It’s an interesting change from previous funds which have been targeted on relatively small geographic areas,” he said. “In terms of deployment and that ability to create a legacy fund, this gives us a much better structure.”

For instance, previous funds often worked on a match funding basis, which meant that even where it has found a suitable investment target it then has to convince a private sector partner to match this.

Leach said the new fund has already been matched by the European Investment Bank, which has meant that it could make investments immediately. Indeed, he said that the fund opened its doors on December 20th and had made its first investment by the 22nd.

It has since gone on to make four investments and is expected to announce the fifth this week.

This is hardly surprising, given the long delay in its arrival. The initial tender for the  fund was issued in the summer of 2008, with an expectation that it would be up and running by April 2009.

However, it became mired in bureaucracy and was then delayed further by last year’s election process.

North West Regional Development Agency chairman Robert Hough described the process as “extraordinarily complicated and very time-consuming”.

“But it has been worth every minute because we have delivered,” he said.

Hough believes the North West Fund could be seen as one of the key legacies left behind by the regional development agency, which is currently in the process of being wound down.

“It will back businesses led by entrepreneurs who have big ideas and big ambitions who know that innovation creates jobs,” he said.

He also described the target being set of private sector co-investment of around £215m – bringing the total funding pot to £400m – as being “critical to our future”.

Leach said that he expected some investments made by the fund would not be matched at all. However, in others he expects private sector investors to put in 5x or even 10x the amount invested by fund managers.

An initial £170m of cash has been subdivided into six pots, including a £45m development capital fund, a £30m venture capital fund and a £35m loan fund. There are also three sector-based funds – Digital & Creative (£15m), Energy & Environmental (£20m) and biomedical (£25m).

However, £15m has been held back to invest in the areas with the greatest demand as the funds wind down And although there is a 40% investment target set for Merseyside, this is an overall target rather than one for individual funds. As the fund’s activity peaks, the managers will employ around 50 people across 13 offices.

The fund will be fully invested by 2015 and Leach said that the potential two-year gap between its expiration and investments being realised should be plugged by reinvesting the proceeds of previous regional funds, including the North West Business Improvement Scheme.

“The key driver is to create a long-term fund,” said Leach.