We previously published a Legal Update on the UK Government's Future Fund. Our Legal Update summarised the eligibility criteria, the amount of funding available and how the funds could be used. The Government recently announced that, to date, more than 320 start-up firms have benefited from £320 million in Future Fund support. The eligibility criteria for the scheme has now been expanded so that more innovative firms can now apply.
Good news for accelerator programme alumni
The initial Future Fund eligibility criteria meant that firms with a non-UK parent company could not apply for funding. This was particularly problematic for firms who had participated in accelerator programmes such as Techstars or Y-Combinator. It is often a condition of participation in such programmes that the firm in question sets up a non-UK parent company. With that in mind, many firms who had participated in accelerator programmes were prevented from applying for funding from the Future Fund.
However, the Government's recent expansion of the eligibility criteria is such that firms with a non-UK parent company can apply provided they have participated in an accelerator programme. Such firms will still, of course, be required to meet the 'substantive economic presence' tests (that at least half of their staff are based in the UK; and that at least half of their revenue is generated from sales in the UK). Moreover, firms will also need to have raised at least £250,000 in equity investment (being investment in return for shares issued fully paid) from private third-party investors over the last five years.
How are the funds invested?
Firms can apply for between £125,000 and £5 million in funding which will be invested by way of convertible loan notes. If you're unfamiliar with convertible loans, do have a read of our blog post for an overview of the key terms, advantages and disadvantages.
How can Brodies help?
Our Corporate team regularly advises on deals of this type and would be happy to assist if you are considering any type of equity or debt funding, either as an investor or investee.
If you have any questions about this or any other matter relating to your business, please get in touch with any member of the Corporate team or your usual Brodies contact.
