Trea­sury to gain stake in chip de­signer Xmos af­ter Covid loan

The Daily Telegraph - Business - - Business - By Matthew Field

THE Gov­ern­ment is to re­ceive a stake in a tech­nol­ogy com­pany de­sign­ing cut­ting-edge chips for voice as­sis­tants and smart speak­ers.

Xmos, the 15-year-old Bris­tol chip de­signer, re­ceived a $6.4m (£4.8m) con­vert­ible loan from its in­vestors and the Gov­ern­ment’s Fu­ture Fund ear­lier this sum­mer. The loan con­verts into eq­uity if Xmos se­cures new fund­ing, mean­ing the Trea­sury could end up with a slice of the com­pany’s tech­nol­ogy – which is used to power voice tools, such as third-party hard­ware that uses Ama­zon’s Alexa.

The Bri­tish Busi­ness Bank has re­fused to dis­close the size of its in­vest- ments in start-ups via the Fu­ture Fund, cit­ing con­fi­den­tial­ity clauses. How­ever, ac­counts for Xmos re­vealed it was a re­cip­i­ent of the fund­ing.

Mark Lip­pett, Xmos chief ex­ec­u­tive, said: “When the pan­demic started, we had sig­nif­i­cant sup­ply chain con­cerns about China and Tai­wan. We started to think we might need a war chest to strengthen our bal­ance sheet.

“I felt the Fu­ture Fund was done re­ally well. It was smart to set it up with matched in­vestors.

“It is bal­anced from a tax­payer to com­pany per­spec­tive. Hope­fully, that will be re­turned in most if not all cases.”

The Fu­ture Fund, set up by the Gov­ern­ment

through the Bri­tish Busi­ness Bank, was de­signed as the UK’s start-up “res­cue” pot to give com­pa­nies ad­di­tional run­way dur­ing the height of the pan­demic.

It was launched as a £500m fund, with £250m com­mit­ted by the Trea­sury and the rest to be matched by pri­vate in­vestors. But the Fu­ture Fund has been al­lowed to run over that to­tal. The Gov­ern­ment has now com­mit­ted more than £600m to start-ups. The fund is due to run un­til the end of Septem­ber.

Un­der the terms of the scheme, the Gov­ern­ment of­fers a con­vert­ible loan to start-ups of up to £5m, matched by a pri­vate in­vestor.

This note then con­verts to eq­uity when the com­pany next raises fund­ing, mean­ing the tax­payer could end up with stakes in hun­dreds of early-stage busi­nesses.

The Fu­ture Fund has used an open process for this fund­ing, rather than hav­ing ven­ture in­vestors pick com­pa­nies they be­lieve to be win­ners. This has led to a range of com­pa­nies ap­ply­ing for fund­ing from across the UK.

Fund­ing has been ap­proved to high­tech start-ups, in­clud­ing a com­pany build­ing ges­ture-track­ing tech­nol­ogy in Bris­tol. But it has also been in­vested in oth­ers, in­clud­ing a drinks maker, a restau­rant chain and even a sex party busi­ness.

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