The Future Fund - two years on
Figures published at the end of January show that the Future Fund, a scheme launched by the British Business Bank (the BBB) at the height of the pandemic to support innovative UK companies, is now a shareholder in 265 British companies.
The list of businesses which are now part-owned by the Treasury includes retailers like Planks, Pollen + Grace and Conilon (the holding company for Black Sheep Coffee), and tech companies like Plum (a fintech investment platform) and Glint Pay (a digital gold exchange).
Launched by the Chancellor in May 2020, the Future Fund offered UK-based companies an investment of between £125,000 and £5 million, provided that the Future Fund's investment was at least matched by private investors. There were no size or sector restrictions on the businesses which could apply for backing by the Future Fund, but the Government's publicity at the time focussed on small innovative companies, which were seen as critical to sustaining UK growth, given their potential for rapid expansion and job creation. Although the BBB's investment was made by way of a loan note, the debt could convert to equity on certain trigger events, leaving the BBB with a minority shareholding in the borrower company.
The latest figures published by the BBB show that of the 1,190 companies which received funding totalling £1.14bn, a total of 265 companies converted their loans to equity by the end of 2021. Although the triggers leading to conversion of the loans to equity include a sale or listing of the borrower, or maturity of the loan notes after three years, it's likely that the majority of the 265 companies converted their loans when going through a subsequent funding round.
The BBB has been keen to stress the importance of the Future Fund in keeping UK businesses afloat during a difficult lockdown period. 34% of Future Fund loans were made to technology and IP-based businesses, and the Future Fund hopes to share in any upside of the growth of these businesses over the term of the loans and any subsequent equity holding. The BBB has also noted the number of businesses the Future Fund has supported which are outside London (41%), and which have mixed gender or ethnically diverse senior management teams (78% and 56% respectively). While the Government may feel some of the businesses supported by the Future Fund encourage its net zero ambitions (e.g. Save Your Wardrobe, a sustainable fashion app, and Zero Carbon Farms, a sustainable vertical farming company), its shareholdings in other companies like an online betting exchange may prove more controversial over time. A full list of the companies in which the Future Fund now holds shares is available here.
Overall, the Future Fund has been seen as a success for the Treasury, not just supporting UK businesses through the pandemic, but also encouraging growth across a range of UK start-ups. Through its timely investment in these companies, the BBB also drove private sector investment in British companies. Time will tell what return the Treasury sees on its investment, with further loans to convert to equity or be repaid over the next two years.
Applications for the Future Fund closed on 31 January 2021, but the British Business Bank operates a number of other schemes providing similar investment to UK companies, including the Future Fund: Breakthrough, launched in summer 2021 to support high-growth, innovative companies.