The British Business Bank has published a list of 67 additional companies in which the Future Fund holds an equity interest, “taking total equity holdings to 591 as at 30 June 2023.”
The rate of conversions in Q1 2023/4 increased “compared to the previous quarter, with 67 new additions.” Similarly, the number of insolvencies continued “to grow in this quarter, with 18 new insolvencies added.” This comparative increase in corporate activity is in “part due to outstanding Future Fund loans nearing their three year maturity date as well as wider economic conditions.”
Companies in which the Future Fund now “holds an equity interest include Belfast based B-Secur Limited, a biosensing algorithm company that specializes in EKG interpretation; C-Capture Limited, a spinout from the University of Leeds that has patented technology offering a safe, low-cost way to remove carbon dioxide from emissions; Istesso, a drug discovery company developing novel treatments for autoimmunity and fibrosis conditions; and Transcend Packaging Limited, a sustainable packaging company based in Wales.”
Ken Cooper, Managing Director, Venture Solutions, British Business Bank said:
“The Future Fund was created to ensure a flow of capital, at the height of the pandemic, to companies that would otherwise have been unable to access government support schemes, while ensuring long-term value for the UK taxpayer. The Future Fund is now entering the maturity phase, which signals three years since the first loans were executed. The comparative increase in activity this quarter is in part due to outstanding loans nearing their maturity, as we contact companies with outstanding loans in advance to set out the options available to them.”
Launched on 20 May 2020, and open for applications “until 31 January 2021, the Future Fund issued 1,190 companies with convertible loans worth £1.14 billion in total.”
Third-party investors were “required to at least match the Future Fund’s investment.”
The Future Fund supported UK companies “that typically rely on equity investment to fund their growth.” By creating a bridge to the next equity funding round, the Future Fund supported these companies “through a period of considerable economic disruption and now the recovery.”
The scheme used a recognized financial instrument “known as a convertible loan.”
Unlike an equity investment, there wasn’t a requirement “under the convertible loan to value the company or the price of its shares, at a time when company valuations had been significantly impacted by Covid-19.” Instead, the convertible loans are designed “to convert into equity either at the next equity funding round or if the company is acquired through a sale or IPO.”
As noted in the update, equity interests are the number of Future Fund investments in the form of a share.
These arise primarily “as a result of a convertible loan converting into shares following a financing event.” Equity interests also arise “following a sale or an IPO in which investors, including Future Fund, receive share consideration in the form of shares in the acquiring entity.”
Cash realisations: the number of Future Fund investments “that have been realised for cash as a result of a company being acquired.” Consequently, the Future Fund “no longer holds an Equity Interest or a Loan in those companies.”
Insolvencies: the number of Future Fund investments “in respect of companies which have entered administration, liquidation or another formal insolvency process as disclosed in Companies House filings.”
Please note that the original number of Future Fund investments “increased from 1,190 to 1,191 as a result of a demerger of one company.”
The British Business Bank will “update the list of companies in which the Future Fund has an Equity Interest at the end of each financial quarter.”
Starting from this quarter, the British Business Bank will “provide a list of companies which have entered Insolvency.”
On 6 July 2021 the British Business Bank published data “giving a final, comprehensive picture of how the Future Fund has supported businesses during the pandemic.”
As mentioned in the announcement, the Future Fund was “established to support the UK’s innovative businesses affected by Covid-19.”
These businesses were unable “to access other government business support programs, such as CBILS, because they are either pre-revenue or pre-profit and typically rely on equity investment.” The Future Fund closed “to new applications as of June 2021.”
The Future Fund provided UK-based companies “with convertible loans on condition that third-party investors at least match the government’s commitment.”
The convertible loans are designed “to convert into equity at the next equity funding round.”
The Future Fund was developed “by the government and delivered by the British Business Bank.”
The list of firms is available here.
