UK Start-Ups Secure Support Through “Future Fund,” a Government Co-Investment Program

Last month, Financial Times writers Daniel Thomas, Tim Bradshaw and George Parker reported that, “Fast growing start-ups struggling to survive the lockdown will finally secure state support this week with the launch of the £250m co-investment ‘Future Fund.’

“The government is set to take stakes in some of the UK’s most promising companies under the scheme, which will allow bailout loans offered by the Treasury to be converted into equity.”

The FT article noted that, “High-growth tech firms have complained that they have been unable to access any of the government bailout schemes open to businesses hit by the crisis. Start-ups are typically lossmaking in their early years as they seek to scale up, which prevents them from taking a state-backed loan.

The Future Fund will offer up to £5m in government loans as long as the amount is matched by the group’s private sector investors. These loans can then be repaid, or converted into equity at a discount at the next funding round or after three years.

“Unlike equity investment, there is no requirement under these convertible loans to value the company, which helps speed the process at a time when company valuations have been significantly hit by Covid-19. Once companies and their investors complete an application through the BBB portal, they should receive funds in as little as 14 days.”

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