The Chancellor of the Exchequer has adjusted the Future Fund to enable businesses that contribute significantly to the UK economy but do not have their parent company based in the UK because they participated in a non-UK based accelerator program to qualify for the Fund. TechStars and Y-Combinator were referenced as examples of accelerators backing early-stage firms.
HM Treasury explains that accelerators are open programs designed to help promising young firms. They tend to be selective, providing mentorship and funding. Frequently, conditions are set with some accelerator programs outside of the UK that the business is required to create a non-UK incorporated parent company. The government does not want these criteria to be an exclusionary characteristic to accessing the Future Fund. The government states that these changes to eligibility will allow a wider number of suitable companies to apply while maintaining scheme protections against fraud and abuse and ensuring that the Future Fund continues to support economic activity in the UK.
A non-UK ultimate parent company of a corporate group which participated in an Accelerator Program on or before 19 April 2020 may be eligible for the Future Fund, provided that the company has satisfied the following:
- the Company must have raised at least £250,000 in equity from third-party investors in previous funding rounds in the last five years (from 1 April 2015 to 19 April 2020, inclusive);
- if the Company is a member of a corporate group, it must be the ultimate parent company;
- the Company is the equivalent of a UK limited company in the relevant non-UK jurisdiction;
- the Company does not have any of its shares or other securities listed on a regulated market, a multilateral trading facility, a recognised investment exchange and/or any other similar market, stock exchange or listing venue
- it participated in an Accelerator Programme, on or before 19 April 2020, and participation in the Accelerator mandated incorporation of the ultimate parent company in a non-UK jurisdiction;
- if the Group (or any entity within the Group) was in existence before the Company was incorporated, the ultimate parent company of the Group (or the sole entity, if applicable) must have been incorporated in the UK;
- the Company is the ultimate parent company of a Group which has:
- half or more of its employees based in the UK; or
- half or more of its revenues from UK sales;
- it is the ultimate parent company of a group which contains at least one subsidiary operating company incorporated in the UK on or before 31 December 2019; and
- the Company received investment from the Accelerator Programme on or before 19 April 2020.
The Future Fund, which was developed by the government and delivered by the British Business Bank, launched in May and will initially be open until the end of September.
As of 28 June, the Future Fund has approved over £320.6 million of convertible loans to 322 innovative businesses across the UK. Approved firms receive match funding from the fund when it raises the same amount from outside sources such as VCs, Angels, or crowdfunding platforms. Prospective early-stage firms may apply for a convertible loan of between £125,000 and £5 million to help them through the Coronavirus outbreak.
Initially, the government approved £250 million but more funding is now being made available due to the popularity of the scheme. The scale of the scheme will be kept under review.
This technical extension to the Future Fund may mean that for these new companies applying, the assessment of an application involving a non-UK parent company may take additional time to complete due to the need to assess and review documentation received, additional checks that may need to be undertaken and the need to assess information from parties in other jurisdictions.
The changes announced today cover accelerator alumni only. The government stated that it remains committed to using the Future Fund to support economic activity in the UK.
The Chancellor of the Exchequer, Rishi Sunak, commented on the update:
“Our start-ups and innovative firms are one of our great economic strengths. As we begin to bounce back from coronavirus they will help drive our recovery and create new jobs. This change means that those start-ups who have strived to be the very best, and taken opportunities to grow their business, will be able to benefit from our world-leading Future Fund