Close to 100 companies that took money from the state-backed Future Fund have gone bust, highlighting the risks of the Covid-19 support scheme designed to protect promising tech and early-stage businesses at the height of the pandemic.
On Thursday, the government revealed that 83 companies that received convertible loans from the Future Fund had gone into administration or been declared insolvent.
Future Fund converted its investment in a further 12 businesses into equity stakes in businesses that had also failed. The collapse of these businesses puts millions of pounds of taxpayer money in jeopardy.
Officials who helped design the scheme have said they always expected there to be some failures. The fund, which was set up in April 2020, was aimed at companies that were losing money but growing fast, which is typical in early stage firms that are often at a high risk of failure.
According to official data published on Thursday, the British taxpayer has also become a shareholder in 515 companies through the scheme, an increase of 53 businesses in the fourth quarter.
The Future Fund issued 1,190 companies with convertible loans worth £1.14bn in total during the pandemic. It also “exited” 43 companies, usually after a start-up had been bought and the loan repaid.
The scheme was heralded at its launch by then chancellor Rishi Sunak as a way to help start-ups and innovative companies through the pandemic.
Some of the fund’s investments attracted attention after the taxpayer became an owner in companies as varied as Bolton Wanderers Football Club to sex party planner Killing Kittens. But there are also dozens of more traditional tech firms in AI, biotech and life sciences in the portfolio.
Among the new equity investments acquired in the past fourth quarter, the fund converted loans in companies including Dame, which makes toxin-free, carbon negative period products, Sheep Inc, a manufacturer of carbon negative knitwear, and a “holistic” whisky distillery called The Lakes.
The Future Fund has also taken stakes in advanced materials group Oxford Nanosystems, biotech firm Roslin Technologies, online pharmacy Phlo Technologies, Magnitude Biosciences, a life sciences company, and Biorelate, an AI drug discovery platform.
Third-party investors were required to at least match the Future Fund’s investment, which was seen as a way to protect the state’s contribution.
Ken Cooper, managing director, venture solutions at the British Business Bank, which oversaw the fund, said: “The Future Fund was created to ensure a flow of capital, at the height of the pandemic, to companies that would otherwise have been unable to access government support schemes, while ensuring long-term value for the UK taxpayer.”
Source: Financial Times
