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Idea Exchange: Durham will invest £20m in local firms for a £6m return

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Access to finance has historically been an issue for businesses in the North East.

 

  • Project: Finance Durham Limited Partnership Fund
  • Objectives: Economic development of County Durham in a sustainable manner providing greater access to finance
  • Timescale: May 2017 – ongoing
  • Cost to authority: £20m
  • Number of staff working on project: Four people part-time during development, now managed by Maven as a separate company
  • Outcomes: Projected £6m return on investment, modelled on a 10-year period
  • Officer contact details: Simon Goon

While a lot of good work has been done with funds such as the European Commission’s initiative, the Joint European Resources for Micro to Medium Enterprises (JEREMIE), we felt more could be done.

That’s how the idea for the Finance Durham Limited Partnership fund grew. Our new £20m investment programme will help businesses in Durham expand and create thousands of jobs in the process. Finance Durham will support up to 70 companies in the county in its first ten years.

simon goon

simon goon

Simon Goon

What makes it unusual is that, unlike handing out grants, we will be making investments to yield a return, so we expect to see the £20m we invest grow to help even more businesses in the future. Although authorities have created their own investment vehicles in other parts of the UK, it will be the first of its type in the North East.

We have appointed finance firm Maven Capital Partners to run the fund. Maven will also work closely with supported businesses to drive value creation and improve operational performance throughout the life of an investment, without interfering in the day-to-day running of businesses.

Investments will be spread out across all sectors and sizes of business, designed to give a mixed-risk portfolio. It will offer flexible finance options. Funding will range from between £200,000 to £2m, with 10% of the fund being smaller investments of between £10,000 and £40,000 for incubation businesses.

The fund will support both start-ups and established businesses and is not targeting any specific sectors. However, in order to be eligible for Finance Durham investment a business must be based in, or in the process of relocating to, County Durham at the time the investment is made. It will also be required to submit a detailed investment proposal, including a detailed business plan and both current and historic current accounts, and analysis and financial projections based on receiving Finance Durham funding.

In order to fully appraise a funding application, Maven will need to receive a detailed investment proposal covering the key points about the business and growth plans, including:

  • A detailed description of the company and its products or services
  • A growth plan and reasons for seeking Finance Durham investment
  • Details of the market in which it operates, and its profile within that market
  • Its current financial position, historic and current accounts, and analysis and financial projections based on receiving funding
  • Biographies of the key people involved in the business, including relevant sector senior team experience and expertise
  • A strategy for the period post-investment, including potential acquirers, initial public offering opportunities or other strategies.

Maven will undertake due diligence on any proposed investment and will aim to deliver a tailored funding package that suits the growth requirements of the business.

Durham CC has a strong track record of investing in businesses. It was an early stage investor in companies such as Atom Bank, Britain’s first digital bank, which recently raised £219m, and PolyPhotonix, based at the North East Technology Park, which has produced an innovative eye-mask to prevent sight loss and treat eye disease in people with diabetes.

We see this as a more sustainable approach to helping businesses to grow. Business Durham, the economic development company owned by Durham CC, can add its expertise.

We’re seeing more and more firms locate, start up and grow here in County Durham. This £20m to support those businesses as they scale up, create jobs and be a major boost to the county’s economic prosperity.

Simon Goon, managing director of Business Durham, working on behalf of Durham CC

 

 

 

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