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UK Startups Need Help

COVID-hit UK startups cry out for help, as UK gov trails Europe in its response

The UK government is reportedly looking at a range of options to support the startup industry, possibly involving a co-investment model involving state-owned funds (via the British Business Bank) and private VC funds. Investors have been warning that typically loss-making, early-stage startups are at risk of collapse amid the coronavirus crisis. But the moves come far later than generous packages put together by Continental European governments to support their startup sectors.

Ministers understood to be keen to support the strong UK startup and innovation sector and options allegedly being considered include convertible loans, which could either be later repaid or turned into equity stakes owned by the state. This would require matched co-investment with VCs, ensuring only existing venture-backed startups would be eligible.

The FT reports that ministers want to do this on a case-by-case basis and only after companies have first sought fresh capital from private investors.

Also being considered is additional grant funding via InnovateUK, a government body providing support to innovative businesses, and an expansion of RD tax credits.

However, the scale of any government intervention is expected to be far more modest than the government’s previously announced support for small, medium and large companies and their workers, given investors are normally deep-pocketed and tech startups typically employ far fewer people than traditional industries. By contrast, the French and German governments committed €4bn and €2bn in relief for their respective tech startup sectors.

The proposals under consideration include ones put forward by a number of significant players in the UK tech industry, who jointly launched a campaign over the weekend to pressure the government into creating a support package to aid startups struggling to deal with the COVID-19 crisis.

The move comes in the wake of moves by other European countries, such as France and Germany, which have announced significant initiatives.

The Save Our Startups (SOS) campaign published an open letter to British prime minister Boris Johnson warning the country could “lose a generation of startups and high growth businesses to COVID-19.”

It claims more than 30,000 startups employing some 330,000 people do not qualify for existing support measures and are therefore in jeopardy if new policies are not developed to help them.

The campaign was launched by crowdfunding platform Crowdcube and industry body Coadec, and is supported by leading tech figures including Brent Hoberman, the co-founder of Lastminute.com; Alex Chesterman, the cofounder of Zoopla, LoveFilm and Cazoo; and Arnaud Massenet, cofounder of Net-a-Porter.

It is also joined by organizations including The Entrepreneurs Network, Draper Esprit, Virgin Startups, Vala Capital, Innovate Finance, UK Business Angels Association (UKBAA), EISA, Tech London Advocates, Capital Enterprise and Seedrs .

Jeff Lynn, executive chairman and co-founder of Seedrs, who was a signatory to the letter, commented: “The growth of the startup ecosystem has been one of the great successes of the UK economy over the past decade. All that work is now threatened by COVID-19, and that’s why it is essential that the government step in to help at this precarious time–just as the French and German governments are doing. The Save Our Startups campaign sets out three sensible and crucial requests that will make all the difference in ensuring that our startups can continue to be European and world leaders in the decade ahead. I am very pleased that Seedrs and Coadec, both of which I co-founded and chair, are Founding Partners of the campaign, and I hope everyone in the ecosystem will sign onto it.”

The open letter said: “These businesses are making a huge contribution to the economy but are often yet to make a profit because they are investing in their people, technology and bringing innovative products and services to market. They are highly unlikely to qualify for the Coronavirus Business Interruption Loan Scheme (CBILS), which was introduced to provide financial support for SMEs during this pandemic.”

The letter points out that the French and German Governments have already worked to craft support for startups.

Save Our Startups has a three-point proposal for the government, calling on it to:

• Provide an equity-based liquidity package suitable to save startups at risk. While CBILS covers a proportion of UK businesses, the majority of startups and high-growth companies will be excluded and as a result, unsupported.

• Fast track payments to startups from public funding schemes – in particular, RD tax credits and Innovate UK funding grants. Private sector liquidity has taken a major hit during the crisis with angels and micro-funds unable to provide startups and high growth businesses with bridging money.

• Change EIS, SEIS and VCTs to stimulate private equity investment into startup and high growth businesses, since many startups are losing access to debt or equity support.

However, some investors are cool on the idea, pointing out that the government could end up owning stakes in companies that would not otherwise have raised private-sector money, and that there should be a natural falling-off of weaker companies at a time of public crisis.

Investor Robin Klein of Localglobe commented on Twitter that: “The UK Govt has done an incredible job supporting the startup ecosystem” but he called the SOS campaign a “knee jerk” reaction and although he was “100% in favour of rapid BBB and other govt support” this would be through established tools.”

 

Luke Lang, cofounder of Crowdcube, which initiated the campaign with Coadec, commented: “Other European countries have raced to rescue its startup and tech communities, with French and German Governments committing €6bn in funding. The UK is sluggish by comparison, and further delays are unforgivable and threaten thousands of promising startup and high-growth businesses with huge potential.”

The full letter by Save Our Startups can be read here.

Top 100 Signatories:

Darren Westlake – Co-founder CEO, Crowdcube
Luke Lang – Co-founder, Crowdcube
Brent Hoberman – Executive Chairman, Founders Forum
Alex Chesterman – Founder CEO, Cazoo; previously Co-founder LoveFilm and Zoopla
Arnaud Massenet – Co-founder, Net-a-porter
Mike Fuller – Co-founder, ARM
Anthony Fletcher – CEO, Graze
Tania Boler – Founder, Elvie
Giles Andrews – Co-founder, Chairman, Zopa, MarketFinance, Bethnal Green Ventures
Adam Dodds – CEO, Freetrade
Jorge Armanet – CEO Founder, HealthUnlocked
Jamie Ward – CEO, Hussle
Samuel O’Connor – CEO, Coconut
Peter Kelly – CEO, Imployable
Lee Strafford – CEO, ADV
Kirsty Ranger – CEO, IdeaSquares
Gem Misa – CEO, Fullgreen
Doug Monro – Co-founder CEO, Adzuna
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Jeff Lynn – Co-founder Executive Chairman, Seedrs
Stephanie Melodia – Director, Bloom
Tugce Bulut – Founder, Streetbees
Saurav Chopra – Co-founder CEO, Perkbox
Daniel Korski – Founder CEO, PUBLIC
David Dunn – Chair, UK Tech Cluster Group
Philip Salter – Founder, The Entrepreneurs Network
Andrew Tibbitts, COO, TechHub Charlotte Crosswell – CEO, Innovate Finance
Robert Walsh – Managing Partner, Q Ventures
Jenny Tooth OBE – CEO, UKBAA
Jonathan Sibilia – Partner, Draper Esprit
Dom Hallas – Executive Director, The Coalition for a Digital Economy (Coadec)
John Spindler – Co-founder CEO, Capital Enterprise
Mark Brownridge – Director General, EIS Association
Natasha Guerra – Co-founder, Runway East
Andy Fishburn – Managing Director, Virgin Startup
Russ Shaw – Founder, Tech London Advocates
Alex Davies – Founder Chief Executive, Wealth Club
Bruce Davies – Director, UK Crowdfunding Association
Andrew Roughan – Managing Director, Plexal
Jasper Smith – Founder, Vala Capital
Gaby Hersham – Founder, Huckletree
Carlos Silva – Co-founder, Seedrs
Yacob Siadatan- CEO, Ventoura Ltd
Nazim Valimahomed – CEO, Kroo
Katie Vanneck smith – Co-founder, Tortoise Media
Adrian James – CEO, Monily
Paul Naha-Biswas – CEO, Sixley
Oliver Oram – CEO, Chainvine
Rohit Shetty – Co-Founder CEO, ArtBrowser
Richard Cooper – Chief Executive Officer, Novosound Ltd
Sam Lehane – CEO, M.Y.O
David Murray-Hundley – Chairman, E fundamentals
Russell Quirk – Co-Founder, PropergandaPR
Silas Adekunle – CEO, Reach Industries
Matthew Bradley – CEO, Mjp technologies ltd
Charlotte Roach – CEO, Rabble
Ankush Bhatia – CFO, Hussle
Matt Latham – Co-founder, Tickr ltd
Joseph Crabtree – CEO, Additive Manufacturing Technologies (AMT)
Robert Wakeling – CEO, Wadaro Solutions Limited
Joe Sillett – CEO, The Funky Appliance Company
Mike Bristow – CEO, CrowdProperty
Mulenga Agley – CEO, Growthcurve LTD
Kim Nilsson – CEO Founder, Pivigo
Martin Kievit – Co-founder, Metasite OpenCloud limited
Sam Ducker – Co-founder, Calling Anyone
Neha Khurana – CEO, The Legists
Matt Brooke – CEO, Meet.mba Limited
Manoj Ganapathy – CEO, SalesTrip
Adam McVicar – Co-founder, The Resilience Factor
Bikesh Kumar – CEO, Annexon
Ricky Shankar – Chairman, Clear Factor Limited
Sarah Merrick – CEO, Ripple Energy
Dan Wakerley – CEO, Pillar
Demos Demetriou- Co-founder, blazon
Eoin Cooney – CEO, ARROE Limited
Mattt Milligan – Co-founder, Uhubs
Suchit Punnose – CEO, Red Ribbon Asset Management Plc
Laurence Guy – CEO, We Are Pentagon Group
Fred Soneya – Co-Founder Partner, Haatch
Dana Denis-Smith – CEO, Obelisk support
Neil Harmsworth – Chief Operating Officer, Hussle
Nigel Winship – Co-founder, People Matter Technology
Cathy Norbury – Co-Founder, InterAxS Global
Shadi Razak – Co-founder and CTO, CyNation
Hassan Bashir – Co-founder, HealthSteer
Dr Yusuf Vali – Co-founder, Healthsteer
Farid Haque – Co-founder, AssetVault
Brad Goodall – CEO, Banked
Dan McGuire – CEO, cube19
Gaute Juliussen – CEO, Toraphene
Mark Musson – CEO, Humn.ai Ltd
James Gupta – CEO, Synap
Mat Megens – CEO, Hyperjar
Jason Bullock – CEO, Numerous Technology
Tim Gentles – CEO, Hatriq
Marcus Greenwood – CEO, UBIO
Gary Mc Donald – CEO, Limitless Insight
Ryan Gralia – CFO, Fidel Limited
Darrell Coker – Co-founder Head of Product, Flair
Inga Mullins – Co-founder Fluency
Ian Smith – CEO, Being Guided
Kevin Beales – CEO, Refract
Damian Goryszewski – CEO, Colossus Capital Ltd
Mark Milton – CEO, Amberlight Partners
Randel Darby – CEO, Airportr

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