Future Fund: Breakthrough is a promising new funding source for cutting-edge British businesses. Here are the key things you need to know about this scheme.
Future Fund: Breakthrough, a £375 million government fund that will invest in high-tech, high-growth businesses, is now open to applications.
A successor to the original Future Fund, which delivered more than £1 billion in funding to nearly 1,200 cash-strapped startups, Breakthrough is designed to fuel capital-intensive development work by stimulating private investment in cutting-edge companies.
The scheme is targeting innovators in a range of cutting-edge sectors like quantum computing, greentech, and biotechnology that are central to the government’s ambitions of transforming Britain into a “science superpower”.
Like its predecessor, Future Fund: Breakthrough will see the Treasury take sizeable stakes in a range of technology companies.
Through British Patient Capital, a subsidiary of the British Business Bank and the UK’s largest domestic investor, the treasury will participate in investment rounds worth over £30 million and provide up to 30% of the required capital, with the remainder coming from traditional equity investors.
All told, at least £1.25 billion in public and private development funding will be allocated through the Breakthrough scheme.
BPC’s investment terms will match those negotiated by the ‘lead investor’, the private fund or investment vehicle nominated to spearhead the application process.
Which companies are eligible for Future Fund: Breakthrough?
To qualify for Future Fund: Breakthrough, your company must:
- Be incorporated in the UK
- Be raising an investment round of at least £30 million
- Have secured at least £5 million in equity investment over the last five years
- Have significant operations in the UK, meaning at least half of your employees and research team is based in the country
- Be carrying out significant R&D in the UK, as defined by the following criteria:
- Your R&D spending must have accounted for 10% of your total operational cost base, on average, over the last three years
- OR at least 15% in one of the last three years
- You must be developing defensible IP in the UK, which you expect to be your main revenue source
- You expect that at least 20% of your workforce will be conducting R&D for at least three years from the date the investment round closes
- The 20% must be in roles that require a relevant master’s degree or higher
Here, R&D spending is defined “as an original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding”.
Although there is no language on British Patient Capital’s website about applicants’ technologies, the government is looking specifically for deep tech innovations with long development lead times and high capital requirements.
How do I apply for Future Fund: Breakthrough?
Applications to Breakthrough must be made by a ‘lead’ investor, rather than the company looking to receive funding.
A lead investor is a private equity firm participating in the funding round that is one of the following:
1) A fund managed or advised by an FCA authorised (or equivalent) firm with an active fund greater than £100 million and with private sector investments comprising more than 50% of its allocations. The fund also needs to have raised capital from at least three independent (LPs) or equivalent, and must have an investment strategy that aligns with Future Fund: Breakthrough.
2) A fund or investment vehicle, with an appropriate investment strategy, that is managed or advised by a fund manager that has secured investment from a member of the British Business Bank group.
3) Other similar investment vehicles to those above. I.e. a fund with greater than £100m of investment capital, a broad range of independent investors, and an appropriate investment strategy
British Patient Capital also expects the lead investor to contribute “a significant amount to the investment round”. PBC’s website suggests it will judge what qualifies as a ‘significant amount’ on a case-by-case basis.
To start the application process, the lead investor must complete this online form, from which BPC will judge their eligibility to serve as a lead investor.
As part of their application process, the lead investor will be required to present an investment paper to British Patient Capital explaining why they are investing in the benefiting company.
The lead investor will also need to share any legal and financial due diligence reports they’ve prepared on the benefiting company, and pass reputation and customer due diligence checks conducted by BPC.
Looking for funding?
Future Fund: Breakthrough is an exciting opportunity for innovative businesses to secure financing for resource-intensive development work.
But Breakthrough is just one of many government funding schemes geared towards companies conducting R&D.
If you want to learn more about some of the other kinds of funding available to your businesses, take a look at some of our resources.
- The Ultimate Guide to UK Startup Funding
- Government Funding Timeline – What’s Available and When
- Is Your Technology Ready for an Innovation Grant?
And if you want to stay up to date with all the government funding opportunities available to your business, make sure you sign up for our monthly newsletter.