Buckworths calls for angel investment to be included in the £500 million Future Fund
LONDON, 18th MAY 2020 – Today the U.K. government has released updated guidance on the new £500m Future Fund, which involves £250m of taxpayers’ money being invested in startups through the British Business Bank.
Buckworths, the UK’s only law firm working exclusively with start-ups and high growth businesses, welcomes the clarity provided by the British Business Bank but calls for an alternative scheme to be put in place to better incentivise high net worth angel investors to invest in startups.
The Future Fund which opens for applications on Wednesday will match private sector investment with public money from the British Business Bank. This is a step in the right direction to guarantee the future of thousands of high growth startups in the U.K.
However, matched funding by angel investors will not be eligible for the massively popular relief under the Enterprise Investment Scheme (EIS). This means that many earlier stage startups who have lined up investment from angel investors subject to them being able to claim EIS will not be able to participate in the Future Fund. The omission of EIS investment appears to be a result of the State Aid rules and so beyond the government’s control. But the impact is likely to be significant as many startups (including innovative high growth startups which the government claims to be prioritising) may be forced to re-enter the economy without sufficient financial backing.
Michael Buckworth, Managing Director at Buckworths, says:
“We welcome the updated guidance published by the government today in respect of the imminent launch of the Future Fund. This scheme is vital in encouraging private sector investors to take some of the risk in rebooting the British economy.
“While the various COVID-19 relief schemes including CIBLS and the Business Bounce Back Loan Scheme provided funding to tide businesses over throughout lockdown, the Future Fund provides growth funding to startups as they re-launch their businesses.
“However, the exclusion of EIS relief for angels providing matched funding significantly weakens the efficacy of the scheme. Most UK angels are reliant on EIS as a way of reducing their risk and rewarding them for making high risk investments in early stage businesses. These angels will likely not invest as part of the Future Fund thereby excluding a swathe of earlier stage startups from the scheme.
“The UK startup ecosystem which is so important to our economy risks losing a generation of early-stage startups who will be unable to secure funding and so will fail. The government must act now to incentivise angel investors to invest in businesses who have not secured funding from the Future Fund.”
Buckworths is the only UK law firm working exclusively with start-ups and high growth businesses. Founded in 2011, the firm has offices in London and Manchester and advises start-ups in a range of sectors with a particular emphasis on tech, fin-tech, and hospitality businesses.