The Future Fund last year was closely watched by both investors and companies seeking investment. It delivered more than £1.1 billion in convertible loans to over 1,140 applicants. Quite a feat given the speed at which it was rolled out!
The new Future Fund: Breakthrough (“FF Breakthrough”) plugs the gap that the Future Fund left when it closed for applications last year.
FF Breakthrough is now open for applications to help high-growth, research and development intensive companies.
The UK programme will deliver £375 million of government funding via British Patient Capital (“BPC”), the commercial subsidiary of the British Business Bank.
Under the scheme, BPC will make equity co-investments with private investors in growing research and development intensive companies within breakthrough technology sectors.
Due to high research and developments costs, breakthrough technology companies require more capital than other companies in order to assist the later stages of their development. These ‘breakthrough’ industries include quantum computing, life sciences and cleantech. Companies within this sector accelerate the deployment of innovative technologies such as life-saving medicine and technologies that support the UK’s transition to net zero. This will subsequently help build the UK economy, create highly skilled jobs and strengthen the UK’s status as a leader in technology and innovation. Significantly, it is estimated that a 1% growth in these firms could potentially grow the UK economy by £38 billion.
The government will support fast-growing firms looking to raise at least £30 million of investment but FF Breakthrough will only pick up a maximum of 30% of that. In other words, if you want to seek investment from FF Breakthrough, you’ll need to make sure that you have private investors to put in at least £21 million. This high threshold will leave a lot of deserving companies unable to meet the criteria to apply.
As with the Future Fund of last year, the FF Breakthrough scheme is investor-led so companies wishing to apply will need to secure a lead investor who will make the application on the company’s behalf. The lead investor can be a new or existing investor. That investor will be required to share an investment paper with BPC containing the rationale for the investment along with any legal and financial due diligence reports prepared as part of the investment. The lead investor themselves will also be subject to reputation and customer due diligence checks. Although the lead investor does not have to be the largest investor in the round, they will be expected to contribute a significant amount to the total round. From the details released so far, it seems that the application process is more in-depth than for the Future Fund and so companies and their investors will need to be prepared for this.
FF: Breakthrough will require a lead investor to meet one of the following criteria:
FF: Breakthrough will require the company receiving the investment to meet the following criteria:
Eligible investors can apply via the British Patient Capital website. www.britishpatientcapital.co.uk/future-fund-breakthrough/future-fund-breakthrough-application/