Westminster has admitted that foreign companies are poaching British start-ups and has promised to make sure cash raised from innovation stays in the country.
The problem was first highlighted in a report called Bridging the valley of death: improving the commercialisation of research, which was published in March. The government has now responded to the warning that British start-ups were being snapped up by foreign companies, promising to hold a round table discussion in the Autumn to discuss how best to support the UK's start-up scene.
Ministers and apparatchiks will sit down with bankers to identify "opportunities to maximise the benefits for companies seeking support to commercialise their innovation".
The authors of the report said:
"We are concerned that our small companies are too often bought up by larger overseas companies before they can develop into the medium sized enterprises that would produce substantial jobs and wealth in the UK.
"We are convinced that while equity investments have a place, too many companies are forced into over-reliance on this route because other types of funding are unavailable."
The solution, Westminster said, is a new "bank for business" supported by the Business Growth Fund.
Westminster also wants to start up a bond market for medium-sized businesses, which will also give smaller start-ups access to money.
In their response to the initial report, the denizens of Westminster said:
"The Government has set an ambition to make the UK one of the best places to start, finance and grow a business. The business bank is integral to this ambition. It will support the development of diverse debt and equity finance markets for businesses, promoting competition and increased supply through new finance providers.
"It will also increase the provision of finance to viable but under-served businesses, in particular improving the provision of long term finance. We recognise that new investment is crucial for business growth but that securing long term, patient capital is a particular challenge for certain sectors and certain types of company."
When it comes to "early stage technology companies", which we all know as start-ups, where equity investment is the "appropriate form of finance", the government suggested the business bank team up with existing business finance programmes. These would include enterprise capital funds, which offer venture capital, and the Business Angel Co-Investment Fund, which helps funnel angel investment towards start-ups.
According to officials stats, enterprise capital funds have invested more than £180 million of venture capital in over 150 companies to date, with a total investor commitment of nearly £400 million.
In the 2013 Budget, George Osborne promised to spend £75million on giving start-ups venture capital to get them off the ground. ®