UK expands Future Fund to include overseas-based startups

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British Chancellor of the Exchequer Rishi Sunak participates in a “national applause” to thank the work of National Health Service (NHS) workers and front-line medical personnel in the fight against the coronavirus pandemic on the steps of the Foreign and Commonwealth Office (FCO) on April 16, 2020 in London.Tolga Akmen | WPA Pool | Getty Images

The UK government has expanded its rescue program for start-ups affected by the coronavirus pandemic to include companies with parent companies based abroad.The so-called Future Fund was created by the UK Treasury in April to provide a lifeline to unprofitable tech companies unable to access other relief funding programs. Although the government has set aside billions of pounds in emergency loans for companies hit by the crisis, start-ups have said it does not apply to them because they have to prove a history of profits constant. Many start-ups supported by venture capital operate at a loss to accelerate growth.

But tech industry leaders have called on the administration of Prime Minister Boris Johnson to relax eligibility criteria for the Future Fund so that companies participating in acceleration programs like Y Combinator can apply. Such initiatives require start-ups to have parent companies located outside the UK in order to register.

As part of the Future Fund program, start-ups must compel their venture capitalists to request bridge funding from the government. The funds are administered by the state-owned British Business Bank in the form of convertible notes that become stakes in the next round of financing for a start-up – the theory being that this allows the government to make a profit. investment later. .

The £ 500 million ($ 614 million) fund consists of a £ 250 million commitment from the Treasury, with additional funding from the private sector. The start-ups have so far received £ 320 million in support through this initiative, and the government says it is willing to increase the size of the fund if necessary.

“Our start-ups and innovative companies are one of our great economic strengths,” UK Finance Minister Rishi Sunak said on Tuesday. “As we begin to rebound against coronaviruses, they will help us speed up our recovery and create new jobs. This change means that start-ups that have strived to be the best and have seized the opportunities to grow their business will be able to benefit. of our future global fund. ”

Germany and France have taken similar steps to provide their start-ups with continuous access to capital, as the Covid-19 crisis makes it harder for young tech companies to raise funds. Meanwhile, the European Union is reportedly seeking to relax its state aid rules to help tech start-ups based in member countries access government aid.

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