UK government takes equity shares in more than 150 startups

The UK government has taken stakes in 158 high-growth startups after its Covid support loans converted into equity, according to data from the British Business Bank.

Launched in April 2021 by finance minister Rishi Sunak to support startups and loss-making companies with the investment needed to stay afloat during the pandemic, the Future Fund scheme’s investment came in the form of convertible loan notes, giving the UK government equity shares in the enterprise when the funding is converted.

This is the first time the British Business Bank, which acts as the UK government’s development bank, has revealed which firms the government has taken a stake in since the Future Fund was introduced.

Tech-related companies on the list include Vaccitech PLC, which co-invented the Covid-19 vaccine with the University of Oxford; Century Tech, an education platform that uses artificial intelligence (AI) to personalise learning for children; gig ticketing app Dice FM; and Ripple Energy, which allows customers to buy shares in wind farms.

“The Future Fund was set up to ensure that investment keeps flowing to our most innovative businesses, and it’s fantastic that taxpayers now have equity in these top-performing startups,” said Sunak. “Investing in these companies has the potential to accelerate innovations that will transform UK industry, develop new medicines and strengthen our position as a science superpower.” 

Digital secretary Oliver Dowden added that, in “this golden age in UK tech”, the sector has played a crucial role throughout the pandemic, and that firms such as those supported through the Future Fund are key to “driving growth” during the UK’s Covid recovery.

“We’ve been working tirelessly to back digital businesses with pro-innovation policies such as the Future Fund and the National Data Strategy so we can create jobs, wealth and boost people’s digital skills right across the UK,” he said.

According to British Business Bank CEO Catherine Lewis La Torre, the Future Fund was integral to ensuring investment continued flowing to high-growth startups, with more than £1bn of convertible loans being issued to nearly 1,200 firms in total.

“The continued success of companies, such as those supported by the Future Fund, will be essential in ensuring the UK retains its world-leading position in science, innovation and technology,” she said.

To be eligible for the loans, the businesses had to be an unlisted UK registered company and have raised at least £250,000 in equity investment from private, third party investors in the past five years.

In April 2020, Computer Weekly revealed that 83% of the UK’s roughly 30,000 startups were ineligible for Future Fund loans as, according to figures from Dealroom.co (which regularly prepares data on the UK tech sector for the government’s Digital Economy Council) only 5,000 startups have raised £250,000 or more in the past five years.

While the eligibility criteria was eventually expanded in June 2020 to include startups that had previously participated in accelerator programmes, the number of startups that could access the support loans remained limited.

The government previously took a stake in financially troubled satellite technology provider OneWeb in July 2020, committing $500m to deliver the UK’s first sovereign space capability, claiming that the move signalled its ambition for the UK to be a pioneer in the research, development, manufacture and exploitation of novel satellite technologies.

Between 2010 and 2020, investment in the UK’s tech industry has grown from £1.2bn to £11.3bn, with most of this increase taking place since 2015 when investment was £4.1bn.

For example, in 2017, 2019 and 2020, the UK attracted record levels of tech investment, and despite a 28% dip in venture capital funding during 2018 – which was largely attributed to the political uncertainty surrounding Brexit at the time – UK tech firms still managed to raise £2.49bn.

There has also been a tenfold increase in the number of unicorns (companies valued at more than $1bn), which increased from eight in 2010 to 81 by the end of 2020. A further 10 unicorns have been created since the start of 2021.