Future Fund Mark II – “Future Fund: Breakthrough” Scheme

The Coronavirus Future Fund support scheme launched last year was aimed at supporting innovative businesses stay afloat as they were going through a rough patch. At the time the applications closed in January 2021, the scheme had provided over £1.14bn worth of convertible loans to 1,190 companies . Not only did the initiative help businesses pull through the COVID-19 lockdowns, but it also fuelled innovation and encouraged diversity, with 56% of the funding being afforded to BAME management teams. Undoubtedly a success, the scheme has set the scene for further governmental financial support when it comes to innovation.

This is why it came as no surprise when Rishi Sunak announced the new £375m UK-wide “Future Fund: Breakthrough” scheme. In a bid to attract private co-investors, Breakthrough will follow a similar mechanism as its predecessor, providing convertible loans to high-growth innovative start-ups. The scheme is a £375m UK-wide scheme which will encourage private investors to co-invest with government in high-growth, innovative firms.

Key features include:

  • £375m initial fund size
  • Focused on R&D intensive companies
  • Minimum investment round size of £30m
  • Must be a UK based company with significant UK operations
  • Application to be led by established venture capital investors

While clearly not for your very early-stage companies with a minimum investment round of £30m, the new Future Fund: Breakthrough scheme could be seen as a rather strategic move, now that the UK is trying to get ahead in the race towards a net-zero economy with a bias to clean technology and life sciences. Focused very much on disruptive technologies and R&D intensive companies, the loan will greatly accelerate research and development in key industries such as science, healthcare, infrastructure. Furthermore, it is predicted to contribute to the technology boom currently sweeping over the United Kingdom.

British digital champion Revolut was valued only last week at $33bn following a new fundraising , serving now as the poster child for what companies can achieve when they have the necessary support to fuel their high-growth trajectory. Biotech, another maturing sector, has witnessed fundraises worth £830m in the winter of 20-21 alone and is on track for achieving record-breaking numbers by the end of the year.

The Breakthrough Future Fund, so far, is forecast to be beneficial on both ends of the investing spectrum. On one hand, businesses and entrepreneurs with innovative, potent ideas will have the necessary capital to boost their business activity. On the other, individual investors will have a strong incentive to engage with innovative businesses and convert their shares at a discount sometime in the future.

What remains to be seen is, as the Government becomes a shareholder in many of the UK young businesses, is whether it can be expected to engage with the companies it lends to. One thing for sure is that the Government is becoming increasingly, some would say uncharacteristically, involved in every aspect of the UK economy including as a shareholder!

1 https://www.british-business-bank.co.uk/final-future-fund-final-data-shows-scheme-completed-1-14bn-of-convertible-loan-agreements/
2 https://www.ft.com/content/4d7b739c-ffbb-4a29-ac5b-4e7dfddff5ae
3 https://www.bioindustry.org/news-listing/2021-on-track-to-be-another-record-breaking-year-for-uk-biotech-investment-as-investors-see-returns-from-the-maturing-sector.html

Become a member – follow the lead of experienced investors. Sign Up