A finance firm, set up to secure funding to help new ventures grow, has scored its first major success.

NStar, the new technology finance company set up by regional development agency One NorthEast, has been given £33m by the European Union to help businesses develop in the region.

The money will be divided into two venture capital funds - the North-East Proof of Concept Fund (PCF) and the North-East Co-investment Fund (CIF). PCF is aimed at early stage technology opportunities emerging from local universities and businesses. It will build on the foundations that NStar has recently laid down during a pilot scheme for the fund.

The £10m fund, to be invested over five years, is being financed by money from One NorthEast and the European Regional Development Fund (ERDF). CIF will target much bigger deals, again with a focus on technology-related opportunities.

With £23m of European finance, the fund will target companies needing up to £2m in equity capital, though the fund will only provide a proportion of the funds needed on any deal - investing alongside the private sector.

Jonathan Gold, the NStar director who led the bid for the money, believes that CIF will be able to act as an anchor investor in larger deals, giving other venture capitalists and investors the confidence to put their money into early-stage opportunities.

Andrew Mitchell, chief executive of NStar, said: "In effect, we are more than doubling the total amount of venture capital currently available to early-stage and high-growth businesses in the region.

"We intend to make sure that the funds are managed by specialists who really understand the needs of technology businesses and are prepared to go the extra mile to make deals happen."

The establishment of the two funds follows six months of work by the team at NStar, supported by specialists at Government Office for the North East (Gone) and One NorthEast.

Financial and legal support for the transactions was provided by the Brussels offices of Deloittes, Ward Hadaway and Eversheds.

A number of UK regions have been looking at setting up funds under the same programme, but so far only the North-East team has been successful.

Neil Mundy, director of integration at One NorthEast, said: "These new funds will increase the level of support for innovation in the North-East."

Anyone wanting more information about the funds should visit www.nstarfinance.com.