The Future Fund Update
More start-ups and innovative firms will be able to apply for investment from the government’s Future Fund from today (Tuesday 30 June).
The government has announced that:
- companies which have participated in accelerator programmes are now eligible for the popular scheme
- more than 320 early-stage, high-growth firms have so far benefitted from £320 million of support through the Fund
- this surpasses the £250 million initial funding made available by the government
Changes to the scheme’s eligibility criteria will mean that UK companies who have participated in highly selective accelerator programmes and were required, as part of that programme, to have parent companies outside of the UK will now be able to apply for investment.
To date, more than 320 companies have benefitted from £320 million of Future Fund support. Under the scheme, early-stage, high-growth businesses from a diverse range of sectors can apply for a convertible loan of between £125,000 and £5 million to help them through the Coronavirus outbreak.
Initially, £250 million was made available by the government under the Fund, to be matched by private investors, with the Treasury making clear the amount could be increased if needed.
Due to the popularity of the Fund, more funding has been made available, with around £320 million having now been invested. The scale of the scheme will be kept under review.
Accelerator programmes, such as TechStars or Y-Combinator, give businesses access to finance, mentorship and expert networks.
Participants in accelerator programmes are often required to set up a non-UK parent company in order to participate which means some did not meet the Future Fund criteria of having a UK parent company when it opened for applications in May.
The Future Fund is backing high-growth, innovative firms across the country through Covid-19. The scheme has already provided £320.6 million of convertible loans to 320 businesses.
The change announced on 29th June covers accelerator alumni only. The government remains committed to using the Future Fund to support economic activity in the UK.
Companies will still be required to meet the ‘substantive economic presence’ tests (that half or more employees are UK-based and/or half or more revenues are from UK sales).
Coronavirus Future Fund – Opens for applications on 20 May 2020
The Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors.
These convertible loans may be a suitable option for businesses that typically rely on equity investment and are unable to access other government business support programmes because they are either pre-revenue or pre-profit.
The Future Fund was developed by the government and is being delivered by the British Business Bank.
How it works
Investor applies:
The investor, or lead investor of a group of investors, certifies they meet the scheme eligibility criteria and provides key investment details.
Company confirms:
The company confirms the accuracy of the investment application details provided, before submitting the full application.
Contract is finalised:
In the case of approved applications, all parties will execute an agreement (in the template form provided) and satisfy certain conditions set out in the agreement before the funds are released.
Eligibility Criteria:
In order to be eligible for the scheme, each of the investor(s) and the company must meet specific criteria.
The investor must fall within any of the following categories:
- an “investment professional” within the meaning given to that term in article 19 of the FPO
- a high net worth company, unincorporated associated or high value trust falling within article 49(2) of the FPO
- a “certified sophisticated investor” or a “self-certified sophisticated investor” within the meaning given in articles 50 and 50A respectively of the FPO
- a “certified high net worth individual” within the meaning of article 48 of the FPO
- an equivalent professional, high-net worth, institutional or sophisticated investor in accordance with applicable law and regulation in such investor’s home jurisdiction
- an association of high net-worth or sophisticated investors within the meaning of article 51 of the FPO
- capable of being classified as a “professional client” within the meaning given in the glossary to the FCA Rules
- Note that all other investors must fall within one of the above categories in order for them to be eligible to invest in the convertible loan agreement. It is the responsibility of other investors to ensure they are eligible.
- “FCA Rules” means the FCA’s handbook of rules and guidance
- “FPO” means the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005
To be eligible for the scheme, the company must meet the following criteria:
- The company must have raised at least £250,000 in equity from third-party investors in previous funding rounds in the last five years (from 1 April 2015 to 19 April 2020, inclusive)
- If the company is a member of a corporate group, it must be the ultimate parent company
- The company does not have any of its shares or other securities listed on a regulated market, a multilateral trading facility, a recognised investment exchange and/or any other similar market, stock exchange or listing venue
- The company must be a UK incorporated limited company
- The company must have been incorporated on or before 31 December 2019
- At least one of the following must be true for the company:
- Half or more employees are UK based
- Half or more revenues are from UK sales
Investors and companies should note that the proceeds of the convertible loan agreement must not be used by the company to:
- Repay any borrowings from a shareholder or a shareholder related party (other than the repayment of any borrowings pursuant to any bank or venture debt facilities);
- Pay any dividends or other distributions;
- For a period of twelve months from the date of the relevant convertible loan agreement, make any bonus or other discretionary payment to any employee, consultant or director of the company other than as contracted prior to the date hereof and as paid by the company in the ordinary course of business; or
- Pay any advisory or placement fees or bonuses to any corporate finance entity or investment bank or similar service provider on monies advanced by the Future Fund.
Further information on eligibility criteria can be found on https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/future-fund/
How to apply
The Future Fund will open to applications on Wednesday 20 May 2020.
Coronavirus Future Fund as of 20 April 2020
The Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors.
These convertible loans may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.
The scheme will be delivered in partnership with the British Business Bank.
The headline terms setting out the main features expected to apply to the loans are below.
Eligibility
You are eligible if your business:
- is based in the UK
- can attract the equivalent match funding from third-party private investors and institutions
- has previously raised at least £250,000 in equity investment 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 will launch in May 2020. Further details about this scheme will be published by the government shortly.
We are ourselves issuing regular updates via our website and e-mail cannons. If you are not receiving these and would like to be added to the list please e-mail [email protected] with the subject “Add me to your COVID-19 e-mails”.
