By Andrew Jack

A government-backed fund to invest in early-stage technology companies is set to be launched at the end of this year with up to £300m in initial funding, the science and innovation minister said on Thursday.

Lord Drayson told journalists he was “quietly confident” about the volume of private sector matching funds, which would allow the government to release the £150m it had pledged for a planned £1bn innovation investment fund.

The fund, outlined in principle late last year, is designed to support start-up companies in life sciences, low-carbon technologies and digital and advanced manufacturing.

Its aim is to create a European source of support similar to such funding in the US, where the availability of extensive, long-term venture capital provides important backing for businesses.

“The UK’s pre-eminent position in life sciences was under threat, [although] the quality of science coming out of universities is fantastic,” said Lord Drayson. “We have a strong set of companies and we have the management with serial entrepreneurs. We need to make sure they have sufficient capital.”

As the tender deadline approaches, he said he had been very pleased with the applications from private sector “fund of funds” managers bidding to run the entity, which will channel money into other venture capital funds.

Each group involved in the tender has had to propose an investment strategy and indicate likely levels of support from private sector investors, as well as demonstrate their own past performance in successful investment.

Lord Drayson acknowledged that the fund would be run without any political interference from government, and conceded that large amounts could ultimately be invested in European and transatlantic funds. But he stressed the potential within the UK.

He said the planned duration of the £1bn fund had been extended from 10 to 15 years, reflecting the long development cycles of technology companies and the desire for venture capitalists to retain involvement until the businesses have become profitable.

“Would I invest my own money? I’m not allowed to [as a minister], but yes,” he said. “Because people have left that space [of early stage high-tech investment] it’s a happy hunting ground.”