Future Fund takes stakes in 25 businesses, turning debt into equity

Start-ups are turning debt from the Future Fund into equity, meaning that the government now has stakes in these businesses.

An estimated 25 businesses have turned Future Fund debt into equity, according to Beauhurst.

The data provider said that this number is an estimate based on businesses that have subsequently raised funds since an initial Future Fund-eligible deal.

Figures from Companies House can confirm that the Future Fund is now a shareholder in at least two start-ups that have already converted loans into equity stakes. These companies are Propelair, a low-flush toilet maker and Bockatech, a reusable packaging company.

Cornish broadband provider, Wildanet, has also seen a £200,000 Future Fund loan convert into a government equity stake after a recent fundraising.

More government stakes in start-ups are set to be revealed in the coming weeks as companies report their results.

Applications for the Future Fund closed on January 31. In its run it provided convertible loans worth more than £1bn on a combined basis to over 1,000 British start-ups.

These loans automatically turn into equity stakes for the Future Fund in the companies at their next funding rounds. Unless the investors ask to be repaid, that is.

Under the fund, the government provided between £125,000 and £5m to companies which needed match funding from investors.

Many start-ups invest heavily to grow quickly, pushing the business to a loss. Sunak set up the Future Fund back in May 2020 to fill in the gap for these start-ups who weren’t eligible for other emergency Covid-19 business funding.

Running the Future Fund was the responsibility of the state-owned British Business Bank, with Sunak having no say in which businesses could be part-owned by the government.

Crowdfunding platforms, Seedrs and Crowdcube, provided most of the match-funding when the government provided loans through the Future Fund, said Beauhurst. It said that companies who get financing through crowdfunders face less scrutiny than from investments through traditional venture capitalists.

Further reading

What is the future of start-up funding post coronavirus?

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Anna Jordan

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business.

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