The start-up liquidity bridge

The start-up liquidity bridge

The Start-Up Liquidity Bridge

The pressure from the venture capital and start-up community has worked:  The Government has announced its plans to launch a £500 million “Future Fund” aimed at supporting start-ups and high-growth companies during this period of disruption caused by the COVID-19 pandemic.

As highlighted in our article of 15 April “Coronavirus: supporting the start-ups”, in recent days the BVCA and others have highlighted that many innovative UK companies have not been able to access the Government’s existing coronavirus-related liquidity schemes for various reasons, such as ineligibility or bank requirements.  The announced scheme is therefore targeted squarely at plugging this gap in coverage and is welcome news.

In addition to the “Future Fund”, the Government announced that £750 million will be available through grants and loans to support “the most R&D intensive small and medium size firms”.  Access to this R&D funding will be through the national innovation agency, Innovate UK.

The “Future Fund” will be delivered in the form of Government convertible loans ranging from £125,000 to £5 million per company and is intended to be rolled out as a co-investment bridge financing round, with matched funding by private sector money such as VCs and angel investors.  The Government is initially contributing £250 million towards the “Future Fund” and will run the scheme from May to September 2020.  The “Future Fund” is designed to address liquidity concerns in start-ups and high-growth companies that have already raised funding from the private sector, rather than act as a scheme to inject seed funding in newly established start-ups.  In order for a start-up and/or high growth company to access the “Future Fund”, it must, among other things, be an unlisted UK registered company that has raised at least £250,000 in aggregate from private third party investors in previous funding rounds in the last five years.

The Government has published a term sheet setting out the main eligibility requirements and commercial terms it expects to apply to its “Future Fund” investments but the specific terms of each investment will depend on the underlying investee company and what is agreed by the private sector investors.  As details of the “Future Fund” are still to be confirmed, how the VC community reacts to the terms of the “Future Fund” and how many companies take up the scheme remains to be seen.  As is the case with all Government-backed funding schemes, the devil will be in the detail and both private investors and companies looking to access the “Future Fund” should seek professional advice when looking to use the scheme as part of any fundraising.

For support on participating in the “Future Fund” scheme, please contact Nick Atkins or Nassar Nassar.

Contact our experts for further advice

View profile for Nick AtkinsNick Atkins, View profile for Nassar NassarNassar Nassar

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