Future Fund was launched in May 2020 to help businesses through the economic turmoil left in the wake of the coronavirus pandemic. The scheme was to end in September 2020 but finally ended in February 2021.
However, if you received money from the fund, the online portal is still open for managing accounts.
Find out more about what the Future Fund was all about.
Table of contents
What is Future Fund?
Future Fund helps businesses that missed out on other government coronaviruses financial support.
Many start-ups and innovative companies failed to secure funding from other government lifeboat schemes because they were start-ups without any trading history.
Future Fund filled this void from a £250 million war chest bolstered pound-for-pound by private investors who pledged to match the government funding.
Launching Future Fund, Chancellor of the Exchequer, Rishi Sunak, said: “Our start-ups and innovative firms are one of our great economic strengths, and they will help spur our recovery from the pandemic.
“The Future Fund will support firms across the UK to get through the pandemic by stimulating investment so that they can continue to break new ground in technology and innovation.”
What’s the chance of gaining Future Fund backing?
The government-backed British Business Bank has published final data for Future Fund showing how the money was distributed:
- £1.14 billion worth of convertible loans completed with 1,190 companies
- 41 per cent to companies outside London worth £463.7 million
- 78 per cent to mixed-gender senior management teams
- 56 per cent to Black, Asian or other ethnic minority background and white senior management teams
- 34 per cent to technology and businesses based on intellectual property
How Future Fund works
Future Fund provided government loans of £125,000 to £5 million to UK companies – provided a private investor matches the loan amount.
Companies could access funding If:
- Incorporated in the UK before December 31, 2019– but if the company is part of a group, only the parent company can apply
- The company has raised £250,000 or more in equity investment from outside investors during the past five years
- The company is unlisted, and shares are not traded in a regulated market, multilateral platform or any other listing
- At least half the workforce is UK-based, or more than half of revenue comes from sales in the UK
Funding comes as a convertible loan note which transfers into equity during the company’s next fundraising round or exit.
Investing in a Future Fund company
Applications for Future Fund cash must come from a lead investor ready to pump at least £12,500 into the company. Lead investors do not need to have the most significant stake in the funding round, but they must have details about the other investors and the business.
The lead investor can also act in the same role for other companies applying for Future Fund support.
Investors cannot shelter their Future Fund stakes within the EIS or Seed Enterprise Investment Scheme (SEIS).
Companies already benefitting from an EIS or SEIS investment are eligible for Future Fund.
Future Fund terms
Future Fund comes with a set of default terms set by the government – but investors have a chance to negotiate a deal.
The basic terms are:
- Loan term – The loan has a 36-month term. The idea behind setting the term, which is long for a convertible loan note, is to give companies a chance to mount another funding round or an exit. The longer-term also allows the government to try to ratchet up share values.
- Interest – The government expects an 8 per cent minimum return each year. Undoubtedly, investors will want more, and if the company agrees to a higher interest rate with them, the government will demand the same rate.
- Spending the money – Future Fund is to cover working capital. Companies are forbidden to spend the cash on borrowing, bonuses, dividends or fees to advisers
- Equity conversion – The loan balance switched to equity during the company’s next funding round at a share price discounted by at least 20 per cent. The company and investors set the final share price.
The conversion is against the company’s senior share class.
A qualifying round is when an investment is raised that is more or equal to any money received from Future Fund.
Future Fund Breakthrough
Future Fund Breakthrough is a £375 million program for British research and development intensive companies.
Companies need to raise £30 million for investment before applying to the fund – with 70 per cent of the cash pledged by private investors with experience backing innovative companies.
They must also:
- Have raised £5 million or more in prior funding rounds
- Have a UK base and meet the same employee and revenue tests as Future Fund companies
- Evidence of extensive UK-based R&D work meeting three funding tests:
- R&D spending meets 10 per cent of operational costs averaged over three years or has hit at least 15 per cent in one of the past three years
- The company is developing UK intellectual property, which is expected to become their primary revenue source
- At least 20 per cent of the workforce will research for at least 36 months from the investment date
Qualifying businesses will with technologies that could disrupt the industry, uncover new medicines or help move Britain to a net-zero economy.
Future Fund Breakthrough is a separate initiative from Future Fund.
What was the average Future Fund loan size?
The average Future Fund loan size was £95,521. Here’s some more data about loan sizes:
|Investment Range||No. of companies|
|£125,000 – £500,000||600|
|£500,001 – £1,000,000||260|
|£1,000,001 – £2,500,00||190|
|£2,500,001 – £5,000,000||140|
Future Fund FAQ
The Future Fund Breakthrough program is one of Chancellor Rishi Sunak’s tools in a drive to supercharge the Post-COVID-19 British economy.
The investment targets fast-growing companies at the leading edge of new thinking about science, tech and pharmaceuticals.
According to the British Business Bank, 34 per cent (£3.82 million) of the Future Fund went to businesses with a technology or IP background, followed by business and professional services with 35 per cent (£471.1 million).
Almost all the Future Fund loans went to companies in London and the South East. The regions accounted for 792 from 1,190 companies that received loans and £803 million of the £1.1 billion invested.
Future Fund has closed, but Future Fund Breakthrough is accepting applications.
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