About Us

The £8m Advantage Early Growth Fund ("AEGF") is a region wide, venture capital co-investment fund set up to assist early stage businesses with growth potential and based in the West Midlands.  AEGF is a trading name of Advantage Early Growth Ltd, an independent company, limited by guarantee, set up specially to operate the Fund.

Small, rapidly growing businesses usually absorb a great deal of capital to fuel their expansion. Traditionally they have found it difficult to raise that money from high street banks, which tend to be concerned about the risks involved, and venture capital funds, which are usually seeking larger investments in more established businesses.

Founders of businesses have therefore been dependent on their own savings, financial support from family and friends or sometimes private investors (otherwise known as ‘business angels’).

Although famous for its industry and inventiveness, the West Midlands has lagged well behind most other regions in the rate of formation and growth of small businesses, partly because of a lack of entrepreneurial tradition and partly because of low levels of business angel activity in the region.

The Advantage Early Growth Fund is intended to address both problems by facilitating private investments and helping to make small equity investments a common way of funding a growing business. Early indications suggest that the initiatives are making a significant difference and the West Midlands has begun to move up the performance league table of the UK regions.

A healthy population of small, but growing, businesses are the foundation of future economic prosperity and so it is important to encourage entrepreneurial activity by providing suitable conditions, including access to finance.

Importantly, the Fund is trying to demonstrate that (unlike accepted venture capital industry wisdom) it IS possible to make small investments profitably.  If we succeed we hope that we can attract other, private sector, investors to make more investments of this size and type and so expand the supply of small amounts of risk capital.  In order to succeed in demonstrating this, the Fund has to be profitable and over its 10 year life and produce returns that compare well with the performance of larger venture capital funds.  This means that the Fund has to be strictly commercial in making its investment decisions.

The Early Growth Fund Initiative

The Department of Trade and Industry's “Early Growth Fund” project was seeking to establish a series of small risk capital funds in England to help growing early stage businesses achieve their potential. With the active encouragement of the regional development agency Advantage West Midlands, the Advantage Early Growth Fund was a successful bidder for DTI finance and is now one of eight Early Growth Funds operating in England.  Some invest anywhere in England, some specialise in particular industries and others, like AEGF, are dedicated to a particular region.

Although the Fund uses capital provided by the public sector its investment decisions are totally independent and made on strictly commercial grounds.  There is no 'entitlement' to funding from AEGF and since the funds are limited we will be very selective in making our investment decisions.  They will be based upon what we believe will make the best investments for the Fund to achieve its objective of making an attractive profit.

AEGF's Objectives

The objective is to change the culture of business funding in the West Midlands by making small equity investments a realistic funding option for growing businesses at in the region.

AEGF makes between 10 and 20 investments a year, ranging from £10,000 to £100,000 and averaging about £80,000. In every case it must invest alongside investors from the private sector, on the same terms. The private investor(s) can invest more than the Fund, so long as they pay the same price per share, so total equity investment can be as much as £250,000. In most cases the private sector investor will be “business angels” or a syndicate of small private investors but they may also be companies or another (private sector) fund.  The need to have matching private investors ensures that the fund always invests on strictly commercial terms.

By matching an investment in this way AEGF can more than double the funds going into a business, enabling more rapid growth, making the business more stable, strengthening the balance sheet and so making the business more attractive for bank funding.  Alternatively, by sharing the investment, the Fund can reduce the commitment and risk for the private investor by half.

Equity funding is only suitable for businesses capable of growing significantly but most well-managed businesses are capable of growing if they wish and given the right advice, support and access to funds at critical stages in their development.

Malcolm, Tim & Peter turn to drink after reviewing the portfolio!