The fund, launching in May, is a partnership with the British Business Bank providing UK-based companies with between £125,000 and £5m from the government, with private investors at least matching the government commitment.
A new £1.25bn fund aimed at shoring up the UK’s most innovative start-ups has been launched by the government.
Chancellor of the Exchequer Rishi Sunak, said: “Britain is a global leader when it comes to innovation. Our start-ups and businesses driving research and development are one of our great economic strengths and will help power our growth out of the coronavirus crisis.
“This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”
The financial package includes a new £500 million loan scheme for high-growth firms, called the Future Fund, and £750 million of targeted support for small and medium-sized businesses focusing on research and development.
The £500m Future Fund is comprised of £250m from government combined with equal match funding from private investors.
Delivered in partnership with the British Business Bank and launching in May, the fund will provide UK-based companies with between £125,000 and £5m from the government, with private investors at least matching the government commitment.
These loans will convert to equity if not repaid. To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third-party investors in the last five years.
The government is committing an initial £250m in funding towards the scheme, which will initially be open until the end of September. The scale of the fund will be kept under review.
This package builds on the government’s existing support for innovative, high-growth firms including the £2.5bn British Patient Capital fund, the upcoming £200m Life Sciences Investment Programme, internationally competitive R&D tax reliefs and our major commitments to increase public R&D spending to £22bn by 2024-25.
Charlotte Crosswell, Innovate Finance CEO said: “We welcome the announcement from the Chancellor regarding support for high-growth FinTechs and start-ups. Financial innovation will play a vital role as we emerge from the crisis, especially in areas of financial inclusion, SME financing and digital transformation of the financial services sector.
“More broadly, this is about protecting the innovation in finance that will be vital for the UK’s recovery efforts. These new measures will help FinTech businesses to raise the funds needed to survive the crisis. It will support a sector full of early-stage companies, which are more prone to struggle in these volatile times.
“The UK is already known globally as a leader in fintech and we want to ensure companies have support and funding in place to continue their development at this crucial time.”
"Executed well this will be a tremendous boost for our industry. However, we need to ensure the capital released by this scheme reaches the right companies, where capital can be put to good use, will save and create jobs and ultimately generate a positive return.
“Those overseeing this scheme may want to ensure that for each investment, at least one key investor is an FCA regulated body which would bring comfort to those concerned with governance and strong oversight.“
Erin Platts, Silicon Valley Bank, Head of EMEA and President of the UK Branch says getting funds into the hands of entrepreneurs to protect the UK’s technology and healthcare industry is critical to maintaining our place as one of the most attractive and successful tech hubs globally.
"UK start-ups and scale-ups are creating technologies and jobs that are critical to the development of life-changing breakthroughs and enhancements in the areas of healthcare, finance, communication, education, work and beyond. We believe these actions are a welcome step in the right direction and we look forward to supporting UK innovation companies and their investors through these initiatives and other government programmes.”