The £375m Future Fund: Breakthrough has opened for applications.
Announced by Rishi Sunak during Budget 2021, the UK-wide funding programme will be delivered through British Patient Capital, a commercial subsidiary of the British Business Bank.
Currencycloud’s co-founder, Richard Arundel, said: “Many tech giants started as a fledgling idea spun up on a budget. The UK’s tech community may have broken fundraising records this year, but government-backed schemes are often vital in those early days – especially in R&D intensive fields.”
The scheme is closed off and different to the Future Fund. This fund (now closed) provided convertible loans of up to £5m to a wide variety of innovative UK companies, addressing funding challenges caused by Covid-19.
What is Future Fund: Breakthrough?
Through the Future Fund: Breakthrough programme, British Patient Capital will make equity co-investments with the private sector in later-stage R&D intensive UK companies operating in ‘breakthrough’ operations technology sectors. These sectors include quantum computing, cleantech and life sciences. British Patient Capital will build a portfolio of growth-stage breakthrough technologies over time.
How does the Future Fund: Breakthrough work?
It’s an investor-led programme, meaning that applications can only be made by a lead investor. They can’t be made by companies themselves. The investor must complete an online application form, which will prove their eligibility to act as a lead investor. The process unfolds as follows:
- Assessment of lead investor eligibility by British Patient Capital
- British Patient Capital is introduced to potential investee company by lead investor
- Assessment of company and transaction eligibility by British Patient Capital
- Evaluation of investment opportunity by British Patient Capital
- Decision by British Patient Capital’s Investment Committee
Who is eligible?
The company receiving investment should be UK-based (UK incorporated). It must have significant UK operations, meaning at least half of the company’s overall employment base and at least half of its research employees are based in the UK.
The company must be carrying out R&D activity in the UK by meeting all of the following criteria:
- R&D (as defined by pre-set accounting rules) must have been at least ten per cent of operational costs based on average over the last three years or at least 15 per cent in one of the past three years
- Your company is developing defensible intellectual property in the UK which you expect to be your main revenue resource
- Your company intends that 20 per cent or more of your employees will be carrying out research for at least three years from date of investment, in roles that require a relevant Masters degree or higher
- The company must have raised over £5m of equity investment from third-party equity investors in previous funding rounds in the last five years prior to the Future Fund: Breakthrough investment
- The company must be raising a minimum investment round of £30m
The lead investor is the person applying for the funding – they can be a new or existing investor. The lead investor doesn’t have to be the largest investor in the round but is expected to meet one of these three criteria. The leader can be:
- Any fund managed or advised by an FCA (or equivalent) authorised firm with private sector investment making up greater than £100m. The fund must’ve been raised from capital from at least three independent LPs (or equivalent) and have a written investment strategy that aligns with the strategy that aligns with the investment strategy of Future Fund: Breakthrough
- Any fund or investment vehicle with an appropriate investment strategy, managed or advised by a fund manager which has applied to and obtained an investment from the British Business Bank group. For example, those supported by British Business Capital and by the British Business Bank’s Enterprise Capital Funds programme.
- Other investment vehicles like a minimum of £100m of investment capital, a broad range of investors (at least three), a demonstrable track record and an appropriate investment strategy where these have been approved by Future Fund: Breakthrough.
The investor will have to send an investment paper following their application, including information about valuation, business plan and any other follow-on funding expectations.
How do I apply?
Eligible investors can apply through the British Patient Capital website – fill out the application form at https://www.britishpatientcapital.co.uk/future-fund-breakthrough/future-fund-breakthrough-application/