UK Government Adds COVID-19 Program to Support Early State Ventures. Is it Enough?

Crowdfund Insider | | Apr 20, 2020

UK government covid funding for startups - UK Government Adds COVID-19 Program to Support Early State Ventures. Is it Enough?In a widely anticipated move, HM Treasury announced a new package of bailout programs for early-stage ventures that did not qualify for programs initially set into place to support the COVID-19 battered economy. There have been profound concerns that younger, entrepreneurial firms that require ongoing funding would simply cease to exist – potentially eliminating an entire generation of startups.

The program includes a new £1.25 billion coronavirus package to aid innovative young firms including a £500 million investment fund for high-growth companies impacted by the crisis, made up of funding from government and the private sector.

An additional £750 million of grants and loans were targeted for SMEs focusing on research and development.

Launching in May, the £500 million “Future Fund” will be delivered in partnership with the British Business Bank. The fund will provide UK-based companies with between £125,000 and £5 million from the government, with private investors at least matching the government commitment.

These loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid. To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third-party investors in the last five years.

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Chancellor of the Exchequer Rishi Sunak commented on the new aid packages:

“Britain is a global leader when it comes to innovation. Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis. This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”

Alok Sharma, Business Secretary, said that the packages will “protect some of the most dynamic sectors of our economy” while Secretary of State for Digital, Culture, Media and Sport, Oliver Dowden said that the UK is the tech and creative capital of Europe.

“It is crucial we maintain our place,” Dowden stated.

Charlotte Crosswell, CEO of Innovate Finance – the leading voice in the UK for Fintech innovation, welcomed the announcement from HM Treasury. Crosswell said this was about protecting the innovation in finance that will be vital for the UK’s recovery efforts.

“These new measures will help Fintech businesses to raise the funds needed to survive the crisis. It will support a sector full of early stage companies, which are more prone to struggle in these volatile times. The UK is already known globally as a leader in Fintech and we want to ensure companies have support and funding in place to continue their development at this crucial time.”

Luke Lang, co-founder of Crowdcube and Founding Partner of the Save Our Startups campaign, lauded the news of the new programs. Lang and many other prominent members of the UK entrepreneurial ecosystem published an Open Letter addressed to the UK government earlier this month calling on officials to address the looming startup crisis.

“The UK Government has finally stepped up and taken action against the looming crisis for Britain’s celebrated startup and scaleup community. The funding package outlined today will undoubtedly make a real difference to thousands of fast growth businesses.  It’s now vital we focus on getting this investment to the right businesses swiftly so we minimise any damage caused by Covid-19 and ensure Britain’s most ambitious businesses not only survive this crisis but are able to thrive again once the bounce back begins.”

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Lang explained that the new measures followed weeks of lobbying the UK government. The Save Our Startups program was endorsed by high profile names like; Baroness Lane-Fox, Co-founder of Lastminute.com; Alex Chesterman, Founder of Cazoo, LoveFilm and Zoopla; Arnaud Massenet, Co-founder of Net-a-porter; Mike Muller, Co-founder of ARM; Anthony Fletcher, CEO of Graze; Guillaume Pousaz – Founder & CEO, Checkout.com; Louise Hill, Co-founder & COO of gohenry, Will Butler-Adams, Founder and CEO, of Brompton Bicycle; Annabel Jack, Chief Commercial Officer of Made.com and Ines Ures, CMO of Deliveroo.

“Great Britain and London has long been seen as the startup capital of Europe and the envy of our European neighbours but that was under threat from Covid-19 and the subsequent weeks of inaction from the UK Government while other European countries raced to rescue its startup and tech communities with multi-billion Euro funding packages,” added Lang.

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NCFA Jan 2018 resize - UK Government Adds COVID-19 Program to Support Early State Ventures. Is it Enough? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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