Cheshire Cat from Alice in Wonderland Source: Film Still
It appears that for the Queen’s birthday today she has given us a present.
Dubbed the ‘Future Fund’, HM Treasury has sought to pledge more than £1 Billion to the UK’s fintech industry in the wake of the coronavirus-induced depression that Time notes “could shrink Britain’s economy 35% by June”.
Rishi Sunak chimed in today with some warm spring thoughts on his future-first goal of kick-starting the economy with entrepreneurship and the importance of the UK’s unrivalled innovation.
1/ Innovation and entrepreneurship have powered growth in this country for centuries, and it is what will drive our growth as we recover from this crisis.
So today I launched two initiatives to support the most innovative firms in the county, worth £1.25bn. pic.twitter.com/hZZjh3ftOa
— Rishi Sunak #StayHomeSaveLives (@RishiSunak) April 20, 2020
Indeed, it would be folly if the UK did not try to retain it’s title of being the top fintech hub in the globe according to fDi.
Due to be launched in May the Future Fund aims to “issue convertible loans between £125,000 to £5 million to innovative companies which are facing financing difficulties due to the coronavirus outbreak” as seen on gov.uk.
Great to see this support for our tech ecosystem from @hmtreasury – if you’re a fast growing, innovative company you can apply for the Future Fund, to be launched in May 2020 https://t.co/DcDDwU1Z6k
— Level39 (@Level39CW) April 20, 2020
This is arguably a far more fiscally prudent move by the UK (than how government funding in the US is being used in a massive Monetary Financing operation) as if the loans are not paid back it will be converted into equity that the public bank then owns.
It seems that the popular cry from bankers in the past few years that fintech was “eating their lunch” is now falling quiet. In fact, owing to another conditional aspect, funding comes only when a firm “can attract the equivalent match funding from third-party private investors and institutions”- gov.uk.
In other words, if the loan is not paid back, not only would the financial institution own the ‘matched investment’, but it could claim the other half too. From the beginning of next month, the bankers may be saying something different. Something along the lines of “here is a lunch coupon, with some fine print, but don’t worry about that bit for now”.
“Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to,” said the Cat. “I don’t much care where—” said Alice. “Then it doesn’t matter which way you go,” said the Cat.
Slow down if you were thinking of applying for one through the Future Fund by starting a business tomorrow! The loans are only for those businesses that “previously raised at least £250,000 in equity investment from third-party investors in the last 5 years”. Probably the same financial institutions that have been investing in fintechs in the past.
Read: Société Générale snaps up Treezor
Although, there are grants…
£750 million is on the table, courtesy of Her Majesty’s Treasury. However, as seen in TechCrunch, it is reserved for “the most R&D intensive small and medium size firms”. i.e. rocket science, neural networks and engineering solutions to the biological problems of aging.
4/ Secondly, alongside the new Future Fund, the Business Secretary, @AlokSharma_RDG, has worked closely with @innovateuk to provide £750m of grant and loan funding for tens of thousands of existing and new highly innovative firms in every sector, region and nation of the UK.
— Rishi Sunak #StayHomeSaveLives (@RishiSunak) April 20, 2020
But not everyone is happy about it. Robin Klein, partner at London-based VC firm LocalGlobal, wrote in a Sifted Op-Ed that “Please use scarce taxpayers money in the sectors that really need it — hospitality, transport, recreation, arts and charities. Offering startups debt packages or handouts is not the way to go.”
And Chris Skinner also brought our attention to the understanding that the bail-outs from the BoE have not been going exactly according to plan and have been mismanaged.
Things worth reading: 21st April 2020 – Things we’re reading today include …
Bank of England ‘failing climate’ with Covid-19 stimulus programme
CMA letter to Metro Bank on breaches of the Retail Banking Order
Businesses Say Big Banks Flouted ‘First Come First Served…— Chris Skinner (@Chris_Skinner) April 21, 2020
Brett Scott had a different take on the whole situation however, positing that it was much more important that we should form “mutual aid networks to help each other.
In a crisis, each person has 3 inner personas:
Statist: “Authorities must sort this”
Individualist Libertarian: “Back off! Save yourself! To the bunker!”
Communitarian Anarchist: “Let’s form mutual aid networks to help each other”
Let’s nurture the 3rd. It’s good for the soul
— Brett Scott (@Suitpossum) March 16, 2020
If the loan is unpaid does Her Majesty keep the StartUp for her garden party friends?
“I knew who I was this morning, but I have changed a few times since then.”
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