Government announces £1.25 billion funding for venture capital backed companies and starts-ups

The government has announced the establishment of a £1.25bn fund to support high-growth start-ups. The funding comes in two parts:

• A £500m fund, known as the ‘Future Fund’, which will provide match funding to companies who are able to raise funds from private investors; and
• A £750m fund that will be made available to early stage companies through grants and loans from Innovate UK.

The government’s match funding will take the form of an unsecured convertible loan equal to the amount of private money raised by the company in the same funding round. The convertible loan, which can range in amount from £125,000 to £5 million, will automatically convert into equity in the company at a 20% discount to the valuation set in its next funding round – unless the debt is repaid within three years.

The Future Funding scheme will be delivered via the British Business Bank. Further details of the arrangement can be viewed at https://www.gov.uk/guidance/future-fund.

Eligibility

To be eligible for funding from the Future Fund, a company must:

• be based in the UK;
• be able to attract the equivalent match funding from third-party investors; and
• have raised at least £250,000 in equity funding from third-party investors in the last 5 years.

Full eligibility criteria will be published by the government shortly.

How to apply

The Future Fund is to launch in May 2020 and further details will be published in due course.

Access to the loans and grants from Innovate UK are via the normal channels. See https://www.gov.uk/government/organisations/innovate-uk

Conclusion

These funding options will be of valuable assistance to many businesses – especially those in dynamic sectors such as tech and life sciences – who might otherwise be unable to access the Coronavirus Business Interruption Loan Scheme or raise enough capital to survive in the short term.

Originally published at Kermanco.com prior to the firm’s combination with Armstrong Teasdale in early 2021.