Britain’s technology sector today welcomed the Government’s plans to give Covid rescue loans to start-ups but urged the system to be opened up to more businesses.
Chancellor Rishi Sunak’s so-called Future Fund will offer from £125,000 to £5 million which can then be either paid back or converted into equity in future, allowing the taxpayer to share in potential increases in value of the businesses.
Loans will match funds put up by private sector investors.
The move is widely welcomed by a sector struggling from a collapse in revenues, but critics argued it should be mandatory for the loans to convert into equity.
If not, the best businesses would repay the debt, leaving the taxpayer only owning stakes in the weaker ones.
Others were concerned only venture capital firms’ loans would qualify for match funding, leaving businesses backed by angel investors through the Enterprise Investment Scheme out in the cold.
Brent Hoberman, founder of Lastminute.com who now runs the investment firm Founders Factory, said: “We welcome this with open arms. It is a statement of intent that will continue the UK’s leadership in Europen tech. However, we are keen to encourage the Government to go further to unlock even more private capital.”
Start-ups were worried about the complexity of applying.
One said: “This looks like a huge amount of paperwork, both in applying for the loan and then renegotiating terms with all our existing shareholders who will be diluted if it converts to equity further down the line.”
Russ Shaw, founder of Tech London Advocates, a network of tech entrepreneurs, welcomed the measures but warned: “It could take a little while for the money to come through.”
He urged for more use of R&D tax credits and the Innovate UK grants agency.
Sunak pledged £750 million of funding to pumped into research-heavy start-ups through Innovate UK.
