The UK Government has announced a £1.25bn support package for startups driving innovation and development to support with the current Covid-19 pandemic.
On Monday, the Chancellor unveiled the support packages which includes a £500 million investment fund for high-growth companies impacted by the crisis, made up of funding from government and the private sector.
The fund will also support SMEs that are focusing on research and development as they will benefit from £750 million of grants and loans.
Chancellor of the Exchequer Rishi Sunak, said: “Britain is a global leader when it comes to innovation. Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis.
“This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”
In response to the support package and funding, here we analyse how startups, VCs and tech pioneers respond to the announcement.
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Gerard Grech, Chief Executive, Tech Nation, comments:“Tech startups and scaleups are crucial to the UK’s future growth, jobs and innovation. The £500m Future Fund and £750m for loans and grants for R&D for startups is a bold intervention, and although the full implementation details are to still be released, it is likely to give the sector a welcome boost in these unprecedented times.
“The UK’s tech sector has achieved a huge amount in the past 10 years. In 2019, a staggering 33% of all European tech investment was in the UK – the third highest in the world. We must keep building on this success story”
Mark Sanders, Executive Chairman of Scale Space says, “Today’s announcement is good news for scaling companies who now have an opportunity to raise funds to support growth at a time when it is proving more challenging to raise external capital.
“Whilst businesses should be thoughtful about the Government in essence becoming a shareholder, for scaling companies with an existing investor base this scheme ticks all the right boxes and takes the hassle out of finding new investors where a funding need is more than existing investors are able to commit to.
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“We do, however, urge the Government to consider ways to reduce the necessary administration. Time is an increasingly valuable and scare commodity for scaling companies, and solutions to make the application process simple and quick should be given priority to ensure the scheme is accessible to the innovative growth companies across the UK who need funding now.”
Caroline Plumb OBE, CEO of Fluidly’s comments: “The VCs in Europe are sitting on one of the biggest cash piles in history. I’d like to see them back their portfolios rather than rely on the taxpayer.
“With the Future Fund, the taxpayer is matching it 50:50. Many of the VCs are already backed by the government-funded British Business Bank, which is the cornerstone of their funds, so the taxpayer is already heavily involved in supporting startups. I’m glad there is at least a requirement for VCs to match, but if any the government should be doing 25% at most.
Kerry Baldwin, Managing Partner at IQ Capital and Vice-Chair of the BVCA says: “The Government’s £250m ‘Future Fund’, and the additional £750m R&D support, are encouraging steps towards safeguarding and nurturing UK science and innovation.
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“It’s been a lot of hard work behind the scenes to get to this point, but I’m pleased with the headway we have made. I am sure this is just the starting point to fine-tune the terms and delivery mechanism, and to release further much-needed funding into the UK’s early stage tech ecosystem.”
Simon Menashy, partner, MMC Ventures says, “It’s great to see the Government responding to the call to back our world-leading startups. Some of these companies will be the powerhouses of the UK’s economic future – it’s critical to ensure the best ones survive through this crisis period.
“It is also very encouraging to see the increased funding for R&D activity and the commitment from the Treasury to speed up payment of tax credits. These payments can be a vital lifeline for early-stage companies in these uncertain times.”
John Milliken, CEO of Speechmatics says, “Like all businesses facing this new pressure brought on by COVID-19, the thousands of start-ups and fast growth technology businesses in the UK need support and it is fantastic that the UK Government has made this important step.
Many of these organisations have years of research and development behind them and to lose the most successful of these companies would be inadvisable when considering the future economic impact on the UK.”
Paul Landau, CEO and founder of Careology adds, “The importance of the Government’s Future Fund cannot be underestimated.
“This financial support will help protect many of the UK’s most promising startups, ensuring they continue to lead the way with much-needed innovation. It will also safeguard the positive impact startups can have on our country’s future economy.”
Michael Niddam, Managing Partner at Kamet Ventures states: “It’s great to see the UK government providing support to our fastest growing startups. By providing this support it is sending a message to VCs that the government is committed to keeping the UK as the leader for innovation in Europe.
“The extra funding for the grants programme will also help early stage research projects and keep the pipeline of new innovation strong.”
Russ Shaw, founder of Tech London Advocates & Global Tech Advocates comments:“Despite trailing behind some of our European counterparts, the Future Fund is a vital lifeline that will give UK start-ups a sense of certainty in a turbulent economic period. The conversion of debt into equity will ensure that early stage businesses are not too debt laden and match funding with private investors is also an important ingredient.”