Following the successful run of the government-backed Future Fund, the British Business Bank has announced that it is set to launch a further fund for development, Future Fund: Breakthrough. This scheme is set to provide up to £375 million of funding to high-growth and innovative firms. The British Business Bank will co-invest with venture capital investors in R&D-intensive companies, through British Patient Capital, the British Business Bank’s commercial subsidiary. It is expected that venture capital investors will take the lead on such investments with the British Business Bank taking direct equity in the investee companies alongside private investors, rather than the convertible loans that were provided pursuant to the Future Fund scheme.
The minimum size of investment round for the Future Fund: Breakthrough scheme has been set at £20 million. The investee company must also be UK-based, with “significant” UK operations. In its announcement, the British Business Bank specifically indicated its intention to back companies which will aid the development of technologies which will transform major industries, aid in the development of new medicines or support the government’s move to a net zero economy by 2050. This will supplement the debt-focused recovery loan scheme, also announced by Rishi Sunak in the Budget.
In 2020, the British Business Bank set up the Future Fund to help fund innovative UK-based companies which were facing financial difficulties in the height of the COVID crisis. Through the Future Fund, the British Business Bank provided loans to struggling companies, with the ability to convert into equity holdings for the Government at a later stage. The British Business Bank’s Future Fund has supported over 1,000 UK-based start-ups with over £1 billion of Government loans and has now been closed to new funding applications.
The announcement of the new Future Fund, together with the intention to introduce “ambitious visa reforms” and a new “Help to Grow” scheme, indicates a clear shift by the Government to move to support the research and development industry during the UK’s post-pandemic recovery. Details of the new Future Fund: Breakthrough scheme have yet to be finalised ahead of the intended launch this summer. We will provide further information and commentary as the terms of the new scheme become public.
