Future Fund: Breakthrough - PKF Francis Clark
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Future Fund: Breakthrough

As someone who is interested in equity and technology companies, I was excited to receive an email from the British Business Bank on the launch of the Future Fund: Breakthrough, a fund through which  “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.”

However, on reading the detail, it may be of interest to only a limited number of our clients. Whilst a number of the businesses we work with are tech based and looking for equity, the minimum equity raise of £30m may be larger than many are (currently) seeking.  I have therefore rounded off this blog with some additional thought of funding outside / to complement a private sector (VC or PE or Business Angel) equity raise.

Key parameters of the Future Fund: Breakthrough

Information about Future Fund: Breakthrough, including full eligibility criteria for lead investors and companies is available here.  Headline details below:

Overview
  • UK-wide programme will deliver £375m of government funding
  • Targets innovative R&D intensive companies developing cutting edge technologies
  • Delivered by British Patient Capital, a commercial subsidiary of British Business Bank
  • Operates on a commercial basis with private sector investors to co-invest with British Patient Capital
Company criteria
  • The company receiving investment should be UK based (UK incorporated) with significant UK operations (meaning at least half of the company’s overall employment base and half of its research employees are based in the UK).
  • The company must be carrying out R&D activity in the UK by meeting all three of the following criteria:
    • R&D spending (as defined by pre-set accounting rules) must have been at least 10% of total operational cost base on average over the last 3 years or at least 15% in one of the past 3 years.
    • Company is developing defensible intellectual property in the UK which they expect to be the company’s main revenue source.
    • Company intends that 20% or more employees will be carrying out research for at least 3 years from the date of investment, in roles that require a relevant master’s degree or higher.
  • The company must have raised at least £5m of equity investment from third-party investors in previous funding rounds in the last five years prior to Future Fund: Breakthrough investment.
  • The company must be raising a minimum investment round size of £30m.
Lead investor criteria The lead investor can be:

  • Any fund managed or advised by an FCA (or equivalent) authorised firm with private sector investment making up greater than 50% of the total fund size and who is currently managing an active fund greater than £100m. The fund must have raised capital from at least three independent LPs (or equivalent) and have a written investment strategy that aligns with the investment strategy of Future Fund: Breakthrough.
  • Any fund or investment vehicle with an appropriate investment strategy, managed or advised by a fund manager which has applied to and obtained an investment from a member of the British Business Bank group. For example, those supported by British Patient Capital and by the British Business Bank’s Enterprise Capital Funds programme.
  • Other investment vehicles with a minimum of £100m of investment capital, a broad range of independent investors (at least 3), a demonstrable track record and an appropriate investment strategy where these have been approved by Future Fund: Breakthrough

PKF Francis Clark

I have shared details with my colleagues across the Corporate Finance team in case they are looking at an equity raise mandates that fulfil the criteria.

Of more general applicability is the Angel CoFund. Echoing my colleague’s comments, we have had limited interaction with that fund since its inception in 2011, but that is not to say that this will not change as we move forward in this new funding environment.

In terms of sources of funding we are seeing innovative companies access alongside equity raises (from Venture Capital and Private Equity firms, including regional fund Cornwall and Isles Scilly Investment Fund), these include:

  • R&D Tax Credits
  • R&D grants (see my colleague’s recent blog for an overview of some of the schemes of which he is aware)

In addition to/alongside fund raising assignments for high growth potential we are also working with those businesses on their strategy discussing, for example, timings of putting an EMI scheme in place.

I know my colleagues in tax are also very busy with Enterprise Investment Scheme/Seed Enterprise Investment Scheme clearance/approval for a number of our clients.

If you would like to speak to PKF Francis Clark in connection with an equity fund raise or other support with your fast-growing innovative company please do not hesitate to contact me or your existing point of contact at the firm.

FEATURING: Nick Tippett
Nick is a Director in the Corporate Finance team. He focuses on business sales, management buyouts, acquisitions and both debt and equity finance raising. He… read more
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