UK Targets Tech Startups With $1.6B ‘Future Fund’

As the world economy stumbles toward a COVID-19 recession, the U.K. has added tech startups to the economic sectors deserving aid in an uncertain time.

The U.K. government said the £1.25 billion ($1.6 billion) “Future Fund” package was aimed at supporting a thriving sector of the economy that was struggling in the staggering economy, according to published reports. Pressure on the government was building after France and Germany came up with cash for tech startups amounting to 4 billion euros ($4.4 billion) and 2 billion euros ($2.2 billion) respectively.

“Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis,” saidBritish Finance Minister Rishi Sunak. “This new, world-leading fund will mean they can access the capital they need at this difficult time.”

Tech startups had criticized the government’s previous bailout efforts as failing to reach them. That’s because those programs were targeted to companies that had been profitable for some time.

Younger startups, however, typically target growth along with research and development instead of producing profits.

The stimulus plan has two parts. One chunk (£250 million) will go into loans for early-stage startups, according to CNBC. The private sector is expected to match the government’s contribution.

To get such a loan, startups must show they have what it takes to make it in the markets: They need to have gotten investors to pony up at least £250,000 in the last five years.

The money comes with strings attached. The government will gain equity, or part ownership, in the companies getting the loans at the time of the startup’s next funding round or when the loan comes due.

The remainder of the “Future Fund” will go to loans and grants for research and development. This stimulus program would run till September.

In addition, talks are underway on another stimulus package aimed at later-stage tech startups.

As previously reported, U.K. programs for small businesses have come under fire for not delivering fast enough.