The U.K. government today announced a bailout package for “high-growth” startups across the country after much deliberations and growing voices for funding from the tech community. The package, called ‘Future Fund’, will be used to ensure the U.K. tech startup eco-system comes out of the ongoing pandemic, which has devoured many small and medium startups.
The funding will start in May and will see the government invest £250 million in the tech eco-system. Startups will have to satisfy few parameters to be eligible for the bailout. Businesses must secure an equal or greater amount of matching fund from private investors, and be a U.K. registered private company that has previously raised at least £250,000 in private investment in the last five years. Applications will initially be open until the end of September this year.
The government will invest anywhere between £125,000 and £5 million in qualifying startups and the scale of the fund will be kept “under review”, indicating more money could be pooled in if required. The fund, by the looks of it, appears to be a convertile loan note.
Apart from the Future Fund, the U.K. government has also announced £750 million for “R&D centric” small and medium-sized firms. The funds will be made available through Innovate UK’s existing grants and loan scheme.
“Innovate UK (the national innovation agency) will accelerate up to £200m of grant and loan payments for its 2,500 existing Innovate UK customers on an opt-in basis,” says the U.K. treasury.
“An extra £550m will also be made available to increase support for existing customers and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding”. The first payment under the “Innovate UK” scheme will be made available by “mid-May”.
The fund comes at a time, when there have been debates over whether loss-making, extensively funded startups be bailed-out using public money. Similar demands have been seen elsewhere as well, most notably in India. Several policy recommendations have been sent to the Government, asking for a multi-billion bailout of country’s tech startups. As of now, government has not come up with any announcement in India, nor are there any indications as such.
A more legitimate way to deal with this could be wherein VC/PE firms pool in their assets to invest collectively in select few companies. There were reports earlier from India about country’s top VC/PE firms, including the likes of Sequoia among others, coming together to form a collective fund. Nothing however, has materialised on that note.