Has the FT lost it?

I stopped paying to read the FT many years ago.  The WSJ Europe is better value and provides real investigative reporting (not to mention that wacky reactionary op-ed page). 

But now I think the FT's editors have really lost their way.  (I'm picking on the editors because I assume they write the headlines and lead paragraph of stories ultimately published.)  

In the March 1 print edition, the FT ran a headline "UK venture capitalists to get state bail-out" (see on search page here).  The same article appeared in the online edition under "IIF to throw entrepreneurs £200m lifeline", which is rather more accurate.  

The article describes a new EU facility designed to encourage investment in UK-based start-ups, and disingenuously positions this as a 'bail-out' of either VCs or entrepreneurs (depending on which edition you read).  This spin on the story was presumably meant to pre-empt populist competition from the headline writers at the Daily Mail?

I've written about the misguided genesis of this Gordon Brown project here, and Fred Destin provides good perspective in his critique of the project here.  The debate the FT should be covering is whether government-directed funds are at all effective in fostering innovation.  But instead the FT does little more than re-tweet this yet-another-bail-out story.

The facts. The IIF is an investment vehicle funded 50:50 by the European Investment Fund (EIF) and the UK government.  As such it is identical to other such facilities that have been run by the EIF in Germany (€500m!), Portugal, Spain, France, Turkey and other countries for many years.  These are part of an ongoing programme originated by the European Investment Bank (EIB), worth billions of euros, to support innovation and small company formation.

In this context, the UK IIF is simply another European project that is meant to increase the availability of financing for early-stage businesses, which allegedly face an 'equity gap'.  

The fund will participate in existing regional and smaller venture funds, who will have more capital to invest than they otherwise would have.  Unlike banks who received equity injections to shore up their balance sheets and to encourage more lending, VCs do not have the option of sitting on the extra capital -- they have to deploy it.  It sits in funds, not on balance sheets.  The beneficiaries are start-ups across the country, who may stay alive longer and end up employing more people. 

Ultimately the government's policy objective is probably to maintain or increase employment. This vehicle is likely to be a highly inefficient way of going about it.

But characterising this as a state bail-out of the UK VC sector is misleading, and represents low-brow low-effort journalism from an outfit that should know, and do, better.