Thoughts from seven fintech industry leaders.
With bank lending under the Coronavirus Business Interruption Loan Scheme (CBILS) continuing at a painfully slow pace, the calls of the startup community were answered yesterday.
Chancellor Rishi Sunak unveiled the Future Fund, a £250m commitment of convertible loan notes to match funding from private investors, and a larger £750m package of targeted support for SMEs focused on research and development.
But how are the fintech community viewing it? Here’s what they said:
“Like every business, we’ve been hit hard by the health crisis. Despite huge demand from businesses looking for loans, the uncertainty means very few have been fulfilled, so we welcome the news of a £1.25bn scheme to support fast-growth startups like ourselves.”
“It’s certainly a good starting point but the government does need to be on standby in case demand outweighs the supply. Of course for this scheme to work, the government must heed the lessons of the Coronavirus Business Interruption Loan Scheme (CBILS) to ensure it’s able to make funds available as readily as possible. Any long delays could spell the end for many startups, which will already be eyeing their runway nervously.”
“However, a fair balance needs to be struck between providing vital support for fast-growth businesses and ensuring taxpayer’s funds are invested appropriately.”
"The VCs in Europe are sitting on one of the biggest cash piles in history. I’d like to see them back their portfolios rather than rely on the taxpayer. With the Future Fund, the taxpayer is matching it 50:50. Many of the VCs are already backed by the government-funded British Business Bank, which is the cornerstone of their funds, so the taxpayer is already heavily involved in supporting startups. I’m glad there is at least a requirement for VCs to match, but if any the government should be doing 25% at most. VCs should instead deploy the dry powder they’re sitting on.”
“There’s a lot of poor investor behaviour at the moment - too many say they’re helping out their portfolios but are striking punitive investment deals. We’re hearing about term sheets being pulled at the last minute or restructured on new terms. There has also been a return of high participation preferences, and coupons on the debt. The fact is, they’ve raised these funds and are sitting on these massive asset classes.”
“Instead, government money should be used to support many ordinary businesses more. I think all service-based businesses should have simply been treated like retail, hospitality and leisure from the outset. Business rates and rents will cripple those businesses with offices lying empty. So rather than single out tech startups and turn on a funding tap, all businesses unable to operate as normal needed some relief sooner."
“While there may be devil in these and other details, I am optimistic that the open issues will be resolved in a sensible way, and that the final package will prove an effective solution that will help a tremendous number of Britain’s high-potential startups and scaleups make it through this crisis.”
"The UK Government has finally stepped up and taken action against the looming crisis for Britain’s celebrated startup and scaleup community. The funding package outlined today will undoubtedly make a real difference to thousands of fast growth businesses.”
“It’s now vital we focus on getting this investment to the right businesses swiftly so we minimise any damage caused by Covid-19 and ensure Britain's most ambitious businesses not only survive this crisis but are able to thrive again once the bounce back begins.”
“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.“
"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.”