Launch of a research and development investment program in the United Kingdom
A UK-wide investment program has been launched to provide £ 375million in public funding to research and development (R&D) intensive companies operating in ‘cutting edge’ technology sectors.
The Future Fund: Breakthrough program, which opened to investors on July 20, 2021, was initially announced by the Chancellor of the Exchequer in the March budget and will be implemented by British Patient Capital – a commercial subsidiary of the development British government economic policy. bank, British Business Bank.
The fund is designed to target R&D-intensive companies in cutting-edge technology sectors, including quantum computing, cleantech and life sciences, to fuel their continued growth.
Due to their potential to have a significant economic impact, the growth of these innovative companies is seen as essential by the government for the future prosperity and economic recovery of the UK.
British Patient Capital will aim, over time, to build a portfolio of high-growth, cutting-edge technology companies and make equity co-investments alongside private sector investors.
“With many world-class universities and a solid background in science and research, the UK is fertile ground for building high-growth companies based on cutting-edge technologies,” said Judith Hartley, CEO of British Patient Capital.
“Through commercialization of R&D, these transformative companies will help accelerate the deployment of innovative disruptive technologies that can transform key industries, develop new medicines, support the transition to a net zero economy and strengthen the UK’s position. as a scientific superpower.
“Future Fund: Breakthrough will enable these R&D intensive companies to raise the patient capital they need to fuel the later stages of their growth and in doing so will help ensure that the UK is a global leader in industries of the future. “
Program eligibility
To be eligible for the program, companies must raise a minimum total investment round of £ 30million, with the fund making a maximum contribution of 30% in each round, meaning that the minimum amount of private sector funding needed is £ 21million.
The company must also have raised at least £ 5million of equity investments from third party investors in previous funding rounds. It must also be based in the UK and have significant operations in the country.
In view of its activity, the company seeking an investment must have spent on average at least 10% of its total operational cost base on R&D during the last three years, or at least 15% during the last three years. one of the last three years.
It should also provide that 20% or more of employees will conduct research for at least three years from the date of investment, in roles that require a relevant master’s degree or higher.
However, as an investor-led program, funding requests can only be made by a qualified lead investor and not by the companies themselves.
“As the potential of technologies such as AI, machine learning and quantum computing is fully realized and applied at scale, funding for R&D is more important than ever to make the next generation of innovators UK game-changing market leaders, ”said Gerard Grech, executive director of the Tech Nation entrepreneurial network.
“The funds focused specifically on R&D intensive companies aligned with strategic UK sectors, including net zero companies, will help address some of the biggest challenges facing society today. This will open up new job opportunities, boost economic growth and consolidate UK technology as a world leader. “
The program is distinct and different from the now-closed Future Fund, which has provided convertible loans of up to £ 5million to a wide variety of innovative UK companies, to address the funding challenges caused by Covid-19.
In May 2021, the Confederation of British Industry (CBI) released a report calling for an inclusive and innovative economy, which it said could be achieved in part by increasing investment in R&D to reach organizational levels. for Economic Cooperation and Development (OECD). .
By 2030, according to the report, the UK will have a “distinctive advantage” in focusing on innovation, “including in new technologies, where we will become a natural global hub for R&D.”
The CBI has already asked the government on several occasions to increase its investments in R&D.
Previous investment in “impact startups”
In October 2020, a study by Tech Nation and market intelligence firm Dealroom showed that investments in UK tech startups that meet one or more of the United Nations Sustainable Development Goals have increased almost 10-fold in six years.
The data further revealed that these companies – also known as ‘impact startups’ – have raised € 1.4 billion so far in 2020, with cleantech and climate companies raising the bulk. of capital.
Impact startups now account for over 15% of all European venture capital (VC) investments, double the global average and three times more than ten years ago, with European companies receiving a total of 6 billion euros in 2019 alone.
Most of these investments in the wider European context have gone to climate technology startups, including those developing electric vehicles, which have attracted € 9.8 billion in venture capital investments. over the past five years.
Separate research by Tech Nation in early September 2020 also found that in Europe, UK net zero-interest startups are leading the way in investment, receiving £ 336million in 2019, a 28% increase from compared to the previous year. In contrast, French and German net zero companies got £ 216m and £ 283m respectively.