The much awaited terms of the Government scheme (the “Future Fund”) to issue convertible loans to innovative companies which are facing financing difficulties due to the Coronavirus outbreak have now been released.
Future Fund overview
Following the government’s Furlough Scheme, this is a second lifeline offered from the government to high-growth startups in distress. There is also the newly announced Innovate UK scheme which offers R&D grants and funding from a £750 million pot.
The Future Fund, which is expected to be rolled out in May, will offer eligible startups investment of £125,000 to £5 million. This funding must be matched by private investors – which has been welcomed by many in the investment sector who felt uncomfortable about the taxpayer taking on the full risk and propping up already cash strapped companies.
The government has now allocated an initial £250 million of taxpayer cash for the Future Fund, with the matching investors taking the overall package to £500 million. This is a respectable amount when we consider that investment in UK startups last year was reported by Tech Nation to be £10.1bn.
We reviewed the scheme, here’s what we found
We’ve delved into the government’s published fund terms point by point, in order to bring you a review of the pros and cons of the Future Fund for both founders and investors, as well as our questions for the British Business Bank.
The SeedLegals line-by-line Future Fund review
We’ll keep updating this document as we get more information. If there are any questions which you would like to address to the British Business Bank which we have not covered, please feel free to reach out to us directly and we will attach them as an addendum.
We will publish the responses as soon as we get them.
Will the fund benefit my startup?
We wrote an article on that here.
We’ve reached out to the BBB to answer our questions
As yet we don’t have a comprehensive answer as our review highlighted a number of questions which we want to direct back to the British Business Bank on behalf of UK startups and their existing investors for some additional clarification.
Is this a “pricey” deal?
And the answer to this is, of course! This is not meant to be a charitable handout, it’s not a top-up to your current/last round. If your company is in financial difficulty and can’t weather this storm, if it meets the eligibility criteria and has a cohort of passionate private sector financial backers who believe in you as a team and your vision then it’s a no-brainer; so yes it’s expensive but if the alternative is imminent death, then surely that becomes irrelevant. If you just need to sit tight or you can access fast cash in other ways, you should without question explore those options first.