Future fund backs UK startups with over £1bn investment

You could be forgiven for not noticing the Future Fund. Alongside the tens of billions pumped into UK businesses struggling to survive in the face of the COVID-19 pandemic through the Bounce Back and Coronavirus Business Interruption loan schemes, the Future Fund generated few headlines and little attention. 

However, the government investments made in these early stage tech startups could pay dividends in the years and decades to come, and have a real impact on the world we live in.

In this startups.co.uk analysis, we’ll examine what the Future Fund is, break down the distribution of the funds, and spotlight a few businesses that have received Future Fund investment.

We’ll cover:

What is the Future Fund?

The Future Fund was created to help UK startups struggling to deal with the financial impact of Covid-19. Most of these fledgling firms were not eligible for the standard business support schemes, they had no revenue and no trading history, nothing to say how much money they usually made before the pandemic (because, in many cases, they made no money).

So, the government agreed to provide convertible loans to eligible startups – loans that, if not paid back, would turn into a stake in the company.

To be eligible for the loans, companies had to be based in the UK (and either have at least half their employees in the UK or at least half their revenues from the UK), and meet the following two crucial criteria:

• They had to have raised at least £250,000 in equity investment from third-party investors in the last five years
• Any government investment had to be at least matched by funding from private investors

While these conditions arguably excluded true startups, they were perhaps understandable, applications had to be processed quickly and the private investment clauses were a handy way of ensuring that they money went to startups with a genuine chance of financial success.

Overall, £1.07bn of Future Fund investment has now been given to over 1,000 companies, with the loan amounts ranging from £125,000 to £5m. 

Where has the money gone?

The Future Fund scheme was administered by the British Business Bank, and their funding breakdown makes for some interesting reading.

Capital gains

Perhaps unsurprisingly, London attracted the majority of Future Fund investment, accounting for 61% of the total value. The South (comprising the South East and South West) accounted for another 15%, followed by the North (North West, North East and Yorkshire and the Humber) with 10%. The East of England took 8%, the Midlands (East Midlands and West Midlands) 4%, and the Devolved Nations (Scotland, Wales and Northern Ireland) had the remaining 3%.

Gender diversity

To analyse senior management gender diversity, the Future Fund relied on self-reporting. This showed that just over three quarters (77%) of funding went to companies with mixed gender senior management teams. While this indicates progress is being made on this front, there was still a huge disparity between the £216.6m awarded to the 278 companies with all male gender senior management teams and the £13.7m awarded to the 13 companies with all female gender senior management teams.

Ethnic diversity

It was a similar story in terms of ethnic diversity. Mixed teams accounted for the majority of the total (£565.1m), but there was a striking difference between the £370.3m invested in companies with all white senior management teams and the £52.3m invested in companies with all BAME senior management teams.

What sort of businesses have been backed by the Future Fund?

There’s no public list of the businesses that have benefited from Future Fund investment, but some of the firms that have confirmed they received funding include:

• Slingshot Simulations – A University of Leeds spin-out that creates “digital twin” simulations – advanced models that can help to predict user behaviour and find optimum solutions.
• CloudNC – A London/Chelmsford startup that’s using AI to automate manufacturing processes and create the world’s most efficient factories.
• Billon – a UK-Polish fintech that’s working on commercial applications for blockchain and distributed ledger technology.

Can I still apply for the Future Fund?

Unfortunately not, applications for the Future Fund closed on 31 January 2021.

If an extension is announced, we’ll let you know on startups.co.uk.