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Tuesday 14 September 2021

Future Fund: 158 down, 1,032 to go?

logoI am broadly supportive of the Future Fund, the UK Government scheme which let UK-based companies borrow between £125k-£5m in convertible loans matched by private investors. Now closed to new applicants, the Future Fund has lent money to 1,190 companies under Convertible Loan Agreements (CLAs) worth £1.14bn through the Government-owned British Business Bank (see here).

The names of 158 companies which have since converted their Future Fund loans to equity were published today (see here) to mark Chancellor Rishi Sunak’s speech at the opening of the ‘Treasury Connect’ conference in London, which brings together CEOs of the UK’s biggest tech firms and investors. The value of these equity stakes was not published.

In principle, I think the Future Fund had the right intentions. It was established to support the UK’s ‘innovative businesses’ affected by Covid-19 which were otherwise unable to access other government business support programmes because they were either pre-revenue or pre-profit.

I would imagine that a fair number of successful applicants will end up failing anyway as that is the very nature of the startup world. But in among the 158 (and growing) number of now Government-backed businesses will be some real success stories. Indeed Sunak cites as an example Vaccitech, which co-invented the COVID-19 vaccine with the University of Oxford.

My concern about the Future Fund lies in how the British Business Bank (BBB) intends to manage its stakes in the remaining 1,000-odd businesses for which they are (I assume) committed to take equity as and when the CLAs convert. Clearly not all of them will make it to ‘conversion’ but even so, the Future Fund portfolio today already exceeds the number of investments held by sizeable VCs such as Draper Esprit (125 investments).

The good intentions of the Future Fund could easily end up thwarted if the BBB doesn’t have a plan how to quickly sort the ‘worthies’ from the ‘no hopers’ – for their good as well as the taxpayers’.

Posted by: Anthony Miller at 09:32

Tags: funding   startup   scaleup  

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