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Half of Future Fund recipients say their businesses may have closed without its support finds new economic evaluation

Press release 11 November 2022

  • Independent evaluation found 48% of Future Fund companies may have closed during the pandemic without the economic lifeline

  • Future Fund’s £1.14 billion of funding supported 1,190 companies with 28,000 employees

  • 62% of Future Fund companies said they would not have been able to raise similar funding from elsewhere

  • 85% of Future Fund recipients have undertaken research and development activities since receiving the funding

  • 90% of Future Fund recipients found the overall application process was clearly explained

An independent economic evaluation of the Future Fund has found that it provided a lifeline to businesses during the pandemic, with 48% of recipients saying their company would have been likely to close without its support.

The evaluation also found that the scheme met its short-term objectives of increasing the availability of equity finance to businesses affected by the pandemic, and delivering finance quickly to recipients.

The British Business Bank commissioned RSM UK Consulting to undertake an early assessment economic evaluation of the Future Fund. The report focuses on lessons learnt from a policy design, delivery and early economic impact perspective.

The Future Fund was created at a time of great uncertainty in the venture capital markets and when the country was learning new ways of working through a pandemic. Against that backdrop, seeing the positive outcomes reflected in this independent evaluation is fantastic. We supported over a thousand companies many of which have since gone on to gain subsequent investment where they might not otherwise have survived. - Ken Cooper Managing Director, Venture Solutions, British Business Bank
COVID-19 presented monumental challenges for British businesses which is why it was so important that the government stepped in during their time of need. Whether it was supporting firms to stay open or equipping them to access capital and grow, today’s findings highlight the vital role of the Future Fund in keeping our most innovative businesses ticking along during a challenging time. My priority is ensuring we continue to champion the interests of British firms to help unlock economic growth right across the country. - Grant Schapps Business Secretary

The Future Fund deployed £1.14 billion of funding through Convertible Loan Agreements (CLAs) to 1,190 equity backed companies, with at least equal match funding from private investors.

Unlike equity investment there wasn’t a requirement under the CLA to value the company at a time when company valuations were significantly impacted by Covid-19.

The CLA was designed as bridge financing due to convert into equity at the next funding round when an equity value can be negotiated between companies and investors.

The evaluation finds the majority of lead match- fund investors preferred the CLA structure over equity co-investment.

The scheme was deployed at pace and was open to applications from May 2020 to January 2021.

The programme was setup within two months of the pandemic emerging in the UK.

This enabled vital financial support to reach early-stage companies quickly at a time when there had been a significant reduction in the availability of equity finance.

Reduced risk of business closures and damage to long-term company prospects

The Covid-19 pandemic led to an unprecedented economic situation across the UK in early 2020, with the number of equity deals falling 32% in Q1 2020 from Q4 2019.

The report states that 62% of Future Fund recipients reported they probably or definitely would not have been able to obtain similar funding from elsewhere.

The report also found that only 26% of respondent companies that received Future Fund support said they could have raised similar equity finance in its absence.

In addition, only 36% of investors would have invested without the Future Fund. Collectively, the 1,190 companies funded by the Future Fund employed 28,000 people.

Providing a lifeline to innovative UK businesses

The Future Fund also provided a lifeline to innovative UK businesses facing the prospect of long-term damage.

Companies supported by the Future Fund were relatively small and at an early stage of their development.

Of the 1,190 companies that received funding, 41% were technology / IP based businesses. 3

Most recipients (85%) reported they have undertaken research and development, developed new or modified goods/services after receiving funding (67%) or expanded digital technologies (65%), supporting the finding that funding went to innovative companies.

Initial results suggest the Future Fund enabled each recipient to invest an extra £122k to support long-term business development. 4

A clear and quick application process

The clear and quick process to access the Future Fund was critical in its success the report finds, with nearly half (46%) of recipients saying the speed of funding attracted them to apply.

The average total time between the start of the application process and funding being approved was 17 days.

The application process was also deemed to be straightforward for investors – 89% of investors either agreed or strongly agreed that the overall application process was clearly explained.

Supporting diverse management teams

Many of the companies that received support from the Future Fund showed a considerable degree of ethnic and gender diversity within the management team.

More than half (52%) of firms had at least one management team member from a Black, Asian or other Ethnic Minority background, with 5% of teams solely from Black, Asian or other Ethnic Minority backgrounds.

More than two-thirds (69%) of companies had at least one female management team member, with 42% of firms also having at least one female founder. 5

This level of diversity was likely due to the broad eligibility criteria and automation of application.

This early assessment is part of a multi-year evaluation of the Future Fund.

Future stages of the evaluation will focus on measuring the programmes impact in more detail.

Delivering large-scale investment relative to similar European schemes

The report finds that next to comparable schemes in Europe (the Business Angel and Syndication Loan scheme in Denmark, the Tech Bridge scheme in France, and TOPPS 6  in the Netherlands), the Future Fund provided greater funding to more businesses.

In comparison to Denmark’s two schemes, the country with the next largest schemes, the Future Fund delivered five times the amount of funding to three times as many companies.

Reviews of similar equity finance programmes from other European countries’ development banks suggest the Future Fund’s broad eligibility criteria and government-backing helped deliver a large-scale finance programme.

  • 3

    British Business Bank analysis of Beauhurst data. Beauhurst’s approach for sectoral classification can attribute more than one sector per company. For example, a company in the technology and retail sectors will be counted as half a deal in each of these two sectors, rather than being counted twice under each sector. This approach ensures the aggregation of individual sectors equals the total number of companies overall.

  • 4

    This is a comparison of a Future Fund recipient company’s annual investment in capital and intangible assets compared to those that did not participate. Although the result is not statistically significant at this stage, the second and third stages of the evaluation will look in more detail at investment impact.

  • 5

    This excludes 45% of companies (531 companies in total) where data on founder gender data was left blank or founder gender was unknown.

  • 6

    Temporary Bridge Loan Programme for innovative Start- and Scale-ups.

Notes to editors

Future Fund

The Future Fund was established to support the UK’s innovative businesses affected by Covid-19. These businesses were unable to access other government business support programmes, such as CBILS, because they are either pre-revenue or pre-profit and typically rely on equity investment. The Future Fund, now closed to new applications, provided UK-based companies with convertible loans, on the condition that third-party investors at least match the Government’s commitment. The convertible loans are designed to convert into equity at the next equity funding round. The Future Fund was developed by government and delivered by the British Business Bank.

About the British Business Bank

The British Business Bank is the UK government’s economic development bank. Established in November 2014, its mission is to drive sustainable growth and prosperity across the UK and to enable the transition to a net zero economy, by improving access to finance for smaller businesses. Its remit is to design, deliver and efficiently manage UK-wide smaller business access to finance programmes for the UK government.

The British Business Bank’s core programmes support over £12.2 billion 1  of finance to more than 96,000 smaller businesses 2 .

As well as increasing the supply and diversity of finance for UK smaller businesses through its programmes, the Bank works to raise awareness of finance options available to smaller businesses. The British Business Bank Finance Hub provides independent and impartial information to businesses about finance options, featuring short films, expert guides, checklists and articles from finance providers to help make their application a success.

The British Business Bank is also responsible for administering the government’s three Coronavirus loan schemes and its Future Fund, together responsible for delivering £80.4 billion in finance to 1.67 million businesses. These schemes are now closed to new applications.

British Business Bank plc is a public limited company registered in England and Wales, registration number 08616013, registered office at Steel City House, West Street, Sheffield, S1 2GQ. Wholly owned by HM Government, the Bank and its subsidiaries are not banking institutions and do not operate as such. They are not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). A complete legal structure chart for the group can be found at the British Business Bank.

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