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West Midlands Plan for Growth

Early Growth Fund

Businesses need growth capital to invest in new premises and plant, R&D and mergers and acquisitions. Historically, the supply of risk capital funding for SMEs in the West Midlands for starting and scaling-up has been poor, with the West Midlands sitting in the bottom quartile for proportion of UK SME deal share and investment share. There are several support activities currently underway, but the West Midlands Plan for Growth provides deeper insight - about where growth capital can boost business, and the importance of that early growth funding complementing direct competitive funding of business, inward investment and land assembly.

The objective is for a larger and more diverse supply of growth capital in the West Midlands, with businesses that are investment ready to use it to generate strong commercial returns. The region is building its critical mass of early growth fund activity to feed those firms with exponential growth potential:

Growth SMEs are the fastest to gain momentum coming out of recession, tending to be more flexible and quicker to adapt to opportunity, particularly technology innovation. Recognising the constrained supply of growth capital in the West Midlands to accelerate the recovery, the WMCA has initiated the West Midland Equity Co-Investment Fund. This £25 million fund will invest equity into the region’s high growth potential SMEs and act as a beacon to crowd-in further private investment. By providing initial and follow-on equity funding into high-growth potential firms registered and trading in the West Midlands, the fund also helps the WMCA collaborate with other public

and private funders so growth firms benefit from high- quality wraparound support. In January 2022, the WMCA and a partner recently concluding a soft-test to validate assumptions made on fund operating cost, deployment ability and potential fund returns. Both parties are continuing with their due diligence, working towards fund launch in September 2022 or sooner.

  • Government’s 2021 Spending Review announced a further £400 million for the British Business Bank to invest in growth businesses across the Midlands. Following the conclusion of the current phase of the Midlands Engine Investment Fund, the West Midlands looks forward to working with the British Business Bank to ensure the new funding – expected to be deployed from late 2022 onwards – drives growth in the Plan for Growth clusters.

  • University spinouts often offer rapid growth potential but have a need for significant growth capital. Some of the region’s universities have recognised the opportunity to work together so their pipeline of spinouts has access to major institutional investment and senior leadership experience. Similar successful models have developed around Toronto, Oxford and the Northern Gritstone university grouping. The expectation is that the collaborating universities will further develop the Midlands’ proposition so a final decision to go to market can be made in the next 12 – 18 months and once a professional management team is in place.
  • Early growth funding is vital for the successful open innovation ecosystems which give OEMs and regions as a whole a strong competitive edge. In the West Midlands, Jaguar Land Rover has, for instance, initiated the Plug and Play UK partnership with the University of Warwick and BT which is a huge asset to the West Midlands, launched in June 2022. It uses the global Plug and Play network to link tech start-ups, plus major early growth funding to around 30 tech businesses in the UK, and the innovation and commercial needs of OEMs.

The West Midlands Combined Authority will build upon its leadership role in two ways. It will boost the supply of early- stage funding from public and private sources as above, and it will ensure that this is linked to a more powerful system of business support, internationalisation advice, and help with land and skills supply.