Startups and early-stage firms are vital to any economy that seeks to foster robust growth and wealth creation. Yet many early-stage firms are focused more on growth than earnings, and thus would not qualify for the programs bundled together by the UK government during the ongoing crisis. While the government-backed Coronavirus Business Interruption Loan Scheme (CBILS) is a valiant effort for more established firms suffering during the pandemic, startups were left out of the bailout equation.
The lack of awareness by the UK government compelled a diverse group of platforms, entrepreneurs, investors and advocates to band together and launch a campaign to Save Our Startups. Announced on April 5th, the initiative included an open letter to the UK government as well as a petition that has now garnered over 5500 signatures.
The message was clear. The UK government has been tone-deaf in excluding early-stage ventures from the Coronavirus bailout package and something needed to done immediately. Otherwise, a legion of entrepreneurs will be obliterated.
Yesterday, the Telegraph reported that HM Treasury is preparing to do just that. “A rescue package” of sorts is in the works that could involve both private investors and the support of the British Business Bank. To quote the article:
“The measures under discussion would seek to unlock private capital by matching funding, likely on a deal-by-deal basis. Usual sources of funding, such as venture capital, have dried up in the face of COVID-19 and many startups cannot tap the Chancellor’s emergency loan scheme. Businesses could receive investment split equally between the Treasury and private backers. However, the Government could take on more of the funding burden at the smaller end of the market that has more difficulty accessing money from private investors.”
While the details of a bailout package crafted by HM Treasury remain unknown, it is encouraging that government officials appear to be realizing the error of omission in the CBILS. The UK has emerged as the leading entrepreneurial ecosystem in Europe. More importantly, and as a leading global financial center, the UK leads Europe in Fintech innovation. It would be malignantly incompetent to put this sector of prominence and economic dynamism at risk. Any funding support provided to early-stage firms goes directly back into the real economy – mainly in sustaining the jobs created by entrepreneurs. When the innovation sector of the economy is burning, you put the fire out. Let’s hope HM Treasury gets it right this time.