Treasury to gain stake in chip designer Xmos after Covid loan
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.