The Future Fund, a UK government initiative to support startups and early-stage ventures – many of which are not profitable, reported 464 applications for the program as of May 31st. As part of a weekly update, HM Treasury quantified the number of applicants – a number that is anticipated to grow over the coming weeks.
Opened for applications on May 20, 2020, the Future Fund process is expected to take 21 days from the initial application to funding being awarded – but it seems approvals may be moving faster than expected.
Designed to support the robust startup sector of the UK economy, the Future Fund will match up to 100% of the amount provided by investor(s), up to a maximum of £5 million.
A business applying to the Future Fund must have a minimum of £250,000 of equity capital within the past five years, a key requirement.
The loans will have a minimum of 8% per annum (non-compounding) interest rate. The interest can be higher, depending on the specifics of the deal. The interest is not payable on a monthly basis and instead will accrue until the loan converts. The loans will mature after 36 months, the interest will either be repaid or convert in equity – thus issuers may never need to pay it back but may give up an equity stake in the firm. These issuers may end up having the UK government as a part-owner of funded companies.
At least initially, £250 million has been allocated to the Future Fund. This amount will remain “under review.” The British Business Bank has published a website dedicated to the program with all the information necessary for applicants.
Crowdfunding platforms are able to participate in the program as they are regulated as investment companies. Seedrs appears to have been first out of the gate and currently lists several Future Fund offerings.
The following companies are each tagged as Future Fund issuers:
- Assetz Capital – a peer to peer lender that is also a CBILS accredited lender that has raised capital via crowdfunding several times.
- Tech Wills Save Us – An educational platform that helps children learn about technology.
- Killing Kittens – A sex-focused platform and “female empowerment brand.”
- UnderTheDoormat – A home accommodation business, offering guests the quality of a hotel in the comfort of homes.
- Fore Fitness Group – The operator of easyGym and PACK45 brands.
- Knoma – A “payment solution enabling lifelong learning as the global economy shifts to one where digital skills are critical for career success.”
- GUNNA Drinks – A craft soft-drink firm.
- Ripple – A clean energy ownership platform.
- Stem + Glory – a plant-based food firm is in registration mode.
Some of the offerings are conditional on Future Fund approval. Several issuers have already been approved by the Future Fund, according to Seedrs. These include GUNNA, Ripple, Tech Will Save Us, and Stem + Glory.
As of today, it does not appear that Crowdcube has listed any Future Fund issuers but that can change at any time.
Having the government as an owner in risky ventures is always a topic that foments debate. Effectively, UK citizens are shareholders. But the argument in support of early-stage ventures is compelling. The Coronavirus is a once in a lifetime crisis (hopefully) that has impacted all businesses. The UK has developed an enviable entrepreneurial ecosystem, including the hot Fintech sector, but many of these companies are operating at a loss and may end up closing without access to sufficient capital. Keeping people employed and businesses up and running is a key policy objective. Other programs, such as the CBLIS and Bounce Back Loans, are designed to backstop a sliding economy. The Future Fund should help accomplish the same for the innovation sector.
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