UK government to take equity in deeptech startups
The UK government has launched a programme that makes equity co-investments with private sector investors in growth stage R&D-intensive British companies. This is similar to the EIC fund from the European Commission that has so far made 116 equity investment in startups in areas such as quantum computing.
For the UK companies, the minimum total investment round size is £30m and the Future Fund: Breakthrough would invest up to £10m. Companies must have already raised at least £5m to be considered.
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Despite the name, this is a very different programme to the now closed Future Fund that provided convertible loans up to £5m to a broad range of companies to address the funding challenges caused by Covid-19.
Instead, this fund is focused on R&D intensive companies that have raised at least £5m in previous funding rounds, making it a fund to scale up and accelerate growth rather than underlying development. This includes quantum computing and cleantech energy research where high research and development costs mean technology companies typically require more capital than other technology companies to fuel the later stages of their growth, says the fund operator British Patient Capital.
The companies must be UK based with significant UK operations and be developing defensible intellectual property in the UK which they expect to be the company’s main revenue source.
This is not a fund for companies to apply to, as the application must be made by a lead investor and the fund would be part of the investment round which is similar to the EIC approach.
The lead investor is the investor applying to Future Fund: Breakthrough and can be a new or existing investor. It doesn’t have to be the largest investor does not have to be the largest investor in the round but is expected to contribute a significant amount to the investment round and will be the focus on due diligence by British Patient Capital. This avoids the issue of the UK governmnt having to pick ‘winning’ companies to support.
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This follows the UK government taking a signficant equity stake in the OneWeb satellite company to resuce it from bankruptcy.
www.britishpatientcapital.co.uk/
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