The chancellor is expanding a coronavirus support fund for UK startups, to ensure firms that shifted their headquarters abroad can still access the scheme, which is designed to help newly launched innovative companies survive the current pandemic
Changes to the Future Fund scheme’s eligibility criteria will mean that UK companies who have participated in highly selective accelerator programmes and were required, as part of that programme, to have parent companies outside of the UK will now be able to apply for investment. Accelerator programmes, such as TechStars or Y-Combinator, give businesses access to finance, mentorship and expert networks.
Participants in accelerator programmes are often required to set up a non-UK parent company in order to participate which means some did not meet the Future Fund criteria of having a UK parent company when it opened for applications in May.
Under the scheme, early-stage, high-growth businesses from a diverse range of sectors can apply for a convertible loan of between £125,000 and £5m to help them through the coronavirus outbreak.
Applicants must have previously raised at least £250,000 of equity investments. The Future Fund loans are matched pound-for-pound by private investors, but the government debt will convert to equity if the loans are not repaid.
The eligibility change covers accelerator alumni only, and companies will still be required to meet the ‘substantive economic presence’ tests (that half or more employees are UK-based and/or half or more revenues are from UK sales).
Business secretary Alok Sharma said: ‘As we restart our economy, it is crucial that our innovators and risk-takers get all the support they need to flourish.
‘Our decision to relax this rule recognises the importance of many of the UK’s most cutting-edge start-ups as we bounce back from coronavirus.’
Initially, £250m was made available by the government under the Fund, to be matched by private investors, with the Treasury making clear the amount could be increased if needed.
So far, the scheme has provided £320.6m of convertible loans to 320 businesses.