After the announcement of the Government support for startups earlier this week, we wanted to explain a little more about what the next steps on this package of support will be, and how you can input.
First, as you will likely have seen the Government’s £1.25bn support package for startups earlier this week (which you can read in more detail here) is in two parts:
A new ‘Future Fund’ to invest between £125,000 and £5 million in matching funds into qualifying startups.
An extra £750 million for Innovate UK to support R&D through grants and loans.
The Future Fund - Next Steps
Whilst the announcement of the Future Fund is a welcome development, there are still some big challenges to overcome before it’s sorted.
Here are what we see as the big questions:
How can we ensure equitable access to the scheme from a good range of founders and businesses in terms of size, regions and diversity?
And how can we guarantee that the money is able to be delivered as quickly as possible?
Here is what we are asking for:
The matching structure must cater for EIS compliance. Allowing flexibility in the structure of private matched funding so that investors can utilise structures such ASAs (and more broadly EIS-compliant incentives) will be vital to crowd in as much private capital as possible as well as making sure a diverse range of businesses and founders can access the scheme.
What counts as matching funds should be defined as broadly as possible. We are determined to ensure that the fund is accessible to a broad range of founders and businesses in terms of size, regions and diversity, and is open to a wide range of investors.
The funding pot must be clearly divided into stages to ensure that it is distributed throughout the ecosystem equitably. To ensure that a wide range of companies are able to access the fund it is vital that companies across the value chain are able to access the scheme. We suggest that this be done by allocating funds to certain stages.
The mechanism for distribution must be made as easy as possible. A simple form-based process should be designed to approve startups seeking Government match funding based on deterministic criteria.
Startups should be able to seek ‘pre-approval’ for matching. Similar to EIS advance assurance, startups should be able to apply through the matching system before they have a matching investor.
In addition, we know we still need answers for companies that fall under the £250k minimum raise threshold. We want to be clear, we advocated for this to be £100k and still think the Government should reconsider. Whether or not they do, we will continue to push for solutions that cover this cohort of companies, including: bootstrapped startups, university spinouts, regional tech and deeptech startups.
We’d love to hear your thoughts, so if you want to input on any of these then please give me a shout!
Innovate UK - Next steps
The £750m allocated to Innovate UK to provide additional liquidity includes £550m of new funding to support R&D activity. Whilst £200m of grant and loan payments will be accelerated to existing Innovate UK customers on an opt-in basis.
We’re still awaiting detail on what all of this means in practice and we’ll continue to push the Government to ensure that this money finds its way to startups that need it the most. Once we receive more details over the next couple of weeks we will of course update you.
We still need your input to push the Government on a range of other issues.
For example, the Welsh Government have done away with the the business rates qualification for their grants to micro-businesses and are just using VAT registration to identify businesses.
This means that in Wales all micro-businesses can access grants of £10,000, even if they do not pay business rates. We are urging the UK government to follow suit because startups are unlikely to pay business rates as they often operate from coworking spaces or sublet.
We’re also already working to ensure that:
Startups who claim the R&D tax credit can continue to. We know that auditors will have to flag the material risk to startups as a result of the crisis. We’re working with HMT, HMRC & DCMS to make sure this doesn’t impact your ability to access the vital credit.