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Support for Startups during Covid-19

The UK government has announced plans for a ‘Future Fund’ in order to support startups and tech businesses struggling during Covid-19. This will help to ensure that loss-making companies receive enough investment to continue activity during the coronavirus pandemic.  This rescue package includes private-private match funding, which will give the government shares in respective enterprises, as well as targeted research and development support.  The UK business secretary, Alok Sharma, stated “This wide-ranging package delivers important help that will protect some of the most dynamic sectors of our economy.”

The government Future Fund is worth £250m and is set to launch in May, providing loans which range in size from £125,000 to £5m to UK companies, subject to at least equal match funding from private investors.  Investment in the scheme will come in the form of convertible loan notes, giving the UK government equity shares in the enterprises when the funding converts in 3 years if loans have not yet been paid back. The government published terms of involvement on 20 April, stating that those eligible for loans must be unlisted UK registered companies who have raised at least £250,000 in equity investment from private, third party investors in the last five years.    

On top of the Future Fund the government is pledging £750m of targeted support for the most research and development intensive small and medium-sized firms, available through Innovate UK’s grants and loan scheme. “Innovate UK, the national innovation agency, will accelerate up to £200 million of grant and loan payments for its 2,500 existing Innovate UK customers on an opt-in basis,” said HM Treasury. “An extra £550 million will also be made available to increase support for existing customers and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding. The first payments will be made by mid-May.”

The above announcements came after pressure was mounting on the government to take action and to help meet the liquidity needs of startups and loss-making companies who were as yet focused on growth rather than profitability, therefore missing out on government support announced in the earlier stages of the Covid-19 outbreak. The news of the Future Fund as well as the additional £750m for smaller R&D focused businesses has been welcomed by venture capitalists and investors, who have urged that funds must be available quickly to help businesses who are in imminent risk of failing.