Treasury-backed fintech Bud wins $80m in new funds

RISHI SUNAK’S controversial pandemic tech fund has received a boost after a start-up it backed won new $80m (£64m) funding from private investors that pushed its valuation into the hundreds of millions.

Open-banking platform Bud Financial received the injection in its most recent funding round after the private equity firm TDR Capital joined forces with existing investors Goldman Sachs, HSBC and ANZ.

Bud was last valued at $60m in 2019, according to Pitchbook Data, following an injection of $20m into the business. With venture capital funding, at this stage in a company’s growth cycle entrepreneurs can expect to sell an equity stake equivalent to 33pc, which would revise Bud’s valuation above $200m.

It is a boost for the Chancellor’s Future Fund, which was launched in May 2020 and designed to prop up loss-making start-ups that were unable to access Covid loans during the pandemic.

Under the loan terms, start-ups could borrow up to £5m from the Treasury, provided they had sourced an equal amount of capital from other investors.

Bud took out a loan of almost £5m through the scheme at the height of the pandemic in August 2020 in order to avoid mass job cuts. But some industry insiders voiced concerns that the Treasury had funnelled money into risky bets and put itself on the hook for considerable losses.

Previously, the Government has been ridiculed for investing in companies including a lavatory maker, a luxury ship designer, and even a private members club that hosts “sex parties”.

Stephen Page, chief executive of SFC Capital, the most active seed investor in the UK, last year said “zombies have stayed in business” because of the fund.

Edward Maslaveckas, chief executive and founder of Bud, said: “At the beginning of the pandemic, fundraising was a challenge, but the Future Fund gave hawkish investors the confidence to invest in companies.”

This government-issued loan functioned as a convertible security. If the company went on to raise more equity, the loan would turn into shares, at a 20pc discount for the Government. Otherwise, the loan would have to be repaid after 36 months at a premium.

Since the deadline for applications closed in January 2021, the Future Fund has issued 1,190 companies with convertible loan agreements totalling £1.14bn. As of March 31 2022, the Treasury held equity in only 28pc of them, suggesting that fewer than a third have subsequently raised funds.