Future Fund: Breakthrough, announced by the Chancellor of the Exchequer at Budget 2021, opens today for applications. This UK-wide programme will deliver £375m of government funding via British Patient Capital, a commercial subsidiary of the British Business Bank.
Due to high research and development costs, breakthrough technology companies typically require more capital than other companies, to fuel the later stages of their growth. Because of their ability to grow rapidly and have a significant economic impact, the growth of these innovative companies is critical to the UK’s future prosperity and economic recovery.
Through the Future Fund: Breakthrough programme, British Patient Capital will make equity co-investments with private sector investors in later stage R&D-intensive UK companies operating in breakthrough technology sectors, such as quantum computing, cleantech, and life sciences. British Patient Capital will construct a portfolio of growth-stage breakthrough technology companies over time.
Future Fund: Breakthrough is focused on an area of the market with a high need for additional patient capital. In order to be eligible for the scheme, companies must, inter alia, be raising a minimum total investment round size of £30m, and the maximum Future Fund: Breakthrough will contribute to an investment round is 30%. This means the minimum amount of private sector funding is £21m. The company must also have raised at least £5m of equity investment from third-party investors in previous funding rounds. As a fully commercial scheme, Future Fund: Breakthrough will invest on the same terms as private sector investors.
The scheme is separate and different to the now closed Future Fund that provided convertible loans of up to £5m to a wide variety of innovative UK companies, to address the funding challenges caused by Covid-19.
Judith Hartley, CEO, British Patient Capital said: “With many world-class universities and a strong track record in science and research, the UK is fertile ground for creating high-growth companies based on cutting edge technologies. Through the commercialisation of R&D, these transformative companies will help accelerate the deployment of innovative breakthrough technologies that can transform major industries; develop new medicines; support the transition to a net zero economy and strengthen the UK’s position as a science 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, help ensure the UK is a world leader in the industries of the future.”
How does Future Fund: Breakthrough work?
Future Fund: Breakthrough is an investor led programme, which means funding applications can only be made by a qualifying lead investor and cannot be made by companies themselves. In order to start the application, the investor must complete an on-line application form, which will provide an initial assessment of their eligibility to act as a lead investor. The process thereafter is as follows:
1. Assessment of lead investor eligibility by British Patient Capital
2. British Patient Capital is introduced to potential investee company by lead investor
3. Assessment of company and transaction eligibility by British Patient Capital
4. Evaluation of investment opportunity by British Patient Capital
5. Decision by British Patient Capital’s Investment Committee
Key Programme Features
• Focused on R&D intensive companies
• Minimum total investment round size of £30m
• Potential investee companies must have raised at least £5m in previous funding rounds
• Potential investee companies must be UK based, with significant UK operations
• The application must be made by a lead investor