Government tipped to boost tech start-ups

Technology start-ups yet to turn a profit from their ideas because the dearth of credit has put their projects on hold are expected to be thrown a financial lifeline.

Having rounded up a group of funding partners, the government is due to make £1billion of venture capital available to 'pre-revenue' IT-led firms from early next year.

Work on the fund could begin as early as January, to help early-stage techies who have fallen victim to both the borrowing crisis and the retreat of seed investors from the sector.

It was called for by the National Endowment for Science, Technology & Arts, which said the UK needs "new growth" sectors to make up for less revenue from financial services.

"In benign economic conditions, a decision like this might take a long time," Nesta chief executive Jonathan Kestenbaum told The Observer.

"But now I think there's a consensus in government and beyond that's something needs to be done quickly. Our sense is there is real momentum."

The emergency fund will be targeted primarily at innovative 'spin-offs' - firms that set up on the back of university-funded research into high-value ideas - which are being starved of finance.

Often serving the biotech, nanotech, sustainability and IT sectors, these firms risk being wasted investments if they cannot secure the next stage of funds to monetise their products or services.

Mainstream businesses, universities and private equity players were tipped as the likeliest fund contributors, despite the latter's about turn from the technology sector in recent years.

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