UK expands £500m fund for start-ups hit by coronavirus
UK Chancellor of the Exchequer Rishi Sunak is expanding a £500 million fund for UK start-ups hit by the coronavirus crisis, to ensure firms that shifted their headquarters abroad can still access the scheme. The Future Fund will now benefit companies that are seen as British in all but name, having moved their parent company to tap US investors or take advantage of so-called accelerator programs.
Accelerators like Us-based Y Combinator often ask firms to set up a US entity in order to access financing, mentorships and expert networks overseas, the Guardian reported.
Future Fund applicants will still have to prove that at least half of their staff are based in the UK and that they make at least 50 percent of their revenues from UK sales, the Treasury said.
“This change means that those start-ups who have strived to be the very best, and taken opportunities to grow their business, will be able to benefit from our world-leading Future Fund,” Sunak said.
The changes come amid a surge in demand for the scheme, which will see the government take stakes in British start-ups that struggle to repay loans due to the coronavirus crisis.
The Future Fund offers convertible government loans worth between £125,000 and £5 million to companies that have previously raised at least £250,000 of equity investments. Those loans are matched pound-for-pound by private investors, but the government debt will convert to equity if the loans are not repaid.
The fund is meant to help start-ups, in sectors like tech and life sciences, that may have otherwise struggled to survive, let alone grow, throughout the coronavirus crisis.
The government initially committed £250 million in loans as part of a £500 million fund that was equally shouldered by private investors. However, the government has now approved £320 million worth of future fund loans to more than 320 early-stage firms.
The Treasury has not confirmed whether there is a cap for the expanded fund, which originally launched on May 20.
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 recognizes the importance of many of the UK’S most cutting-edge start-ups as we bounce back from coronavirus.”