For the latest updates of government business support for tech companies and community resources, visit our Covid-19 Info Hub.
This blog contains the latest significant updates on the Covid-19 pandemic’s impact on UK and global tech and business, including examples of how tech is supporting the fight against this virus.
I’ve said a few times this will be the most high-tech response to a pandemic in human history so far, with many tech companies rising to the challenge to help save lives, save businesses and join communities.
Update 25/09/2020 – Extending support
Yesterday, the Chancellor outlined additional government support. Delivering a speech in Parliament, the Chancellor announced a package of measures to protect jobs and help businesses through the uncertain months ahead.
The announcement signals a shift in gears by the Government towards a sustainable strategy and vision for Britain’s future.
The Jobs Support Scheme from Nov 1st 2020, for six months
With the furlough scheme set to end at the end of next month the Jobs Support Scheme will come into force on the 1st November and will run for six months. The government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand. Employees must be working at least 33% of their usual hours, and it is designed to sit alongside the Jobs Retention Bonus.
Large businesses will have to meet a financial assessment test, so the scheme is only available to those whose turnover is lower now than before experiencing difficulties from Covid-19. There will be no financial assessment test for small and medium enterprises (SMEs).
The Self Employment Income Support Scheme is to be extended
The Government is also extending the Self Employment Income Support Scheme Grant (SEISS). An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus.
The Future Fund and Bounce Back Loans to be extended until November 2020
The Chancellor also announced he would be extending applications for the Future Fund until the end of November. We know that this fund has already supported hundreds of startups, if you would like to apply, see the details here.
Application for Bounce Back Loans have also been extended until the end of November, furthermore, for companies which have already taken out a Bounce Back Loan, the government has put in place a Pay as You Grow flexible repayment system. This includes extending the length of loans from six years to ten, interest-only periods of up to six months and payment holidays.
VAT and Tax cuts and deferrals
- The government also announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year.
- In addition, businesses who deferred their VAT bills will be given the option to pay back in smaller instalments.
- Self-assessment taxpayers will be able to benefit from an additional 12-month extension from HMRC on the “Time to Pay” self-service facility
The new package of support is evidence of the continued Government support for businesses. The support will cater for those hard-hit sectors, and also for those industries that are key to driving forward the new economy, providing viable jobs, and prosperity for the future.
The tech sector is one of those industries. Vacancies across the digital tech sector continue to go up, and the sector already provides well-paid and highly-skilled jobs. More on this in our latest Jobs and Skills report.
It has already become clear the critical role the tech sector will play in the UK’s future. The Government’s funding measures demonstrate their commitment to supporting businesses now, while working towards delivering a new economy for everyone.
Update 08/07/2020 – Chancellor of the chequered
Against a backdrop of the sparsely populated green benches of the House of Commons, the Chancellor set out the ‘second phase’ of his economic response, focused on interventions designed to employ and reskill a huge number of people. If last week was all ‘build build build’ then this week is about the ‘skilled skilled skilled’.
The bones of today’s announcement comprise three elements (more details can be found here):
- Targeting young people with job support: Supporting jobs through a Kickstart scheme to help 100,000s of 16-24 year olds access the job market by paying employers to take this demographic on; more traineeships and apprenticeships; enhanced careers and coaching advice; and an expanded Sector-Based work academies.
- Focusing on a Net Zero economy and infrastructure: Creating jobs through the infrastructure investment already announced as well as a new £3 billion green jobs plan ‘to save money; cut carbon; and create jobs’.
- Protecting against layoffs: Protecting jobs by using a £1000 jobs retention bonus every employee still in place by January
The Tech sector already employs almost three million people, representing an engine room of high-value, highly-skilled and well-paid jobs, with salaries that are, on average, £10k higher than other sectors. Investment in training – especially the £17m into sector based work academies – will help with the essential digital upskilling of the nation, helping us to harness the digital changes that are happening all around us.
A tech-led recovery is already underway – innovation is beating the disease at the front line and it is technology solutions that are enabling our high streets and hospitality sector to reopen. The next step is to ensure that the huge range of interventions for the unemployed are geared towards the needs of our shifting economy. Predictions suggest that by 2030, 50% of the UK economy will be Digital, Tech and Creative industries. That’s just ten years away.
The pandemic is accelerating the fourth industrial revolution, delivering new businesses and new opportunities at a rapid pace. Pre-Covid-19, the Tech sector was growing six times faster than the rest of the economy. The next year two quarters will have a profound impact on the next two decades and the Government must work closely with technology companies – the engine room of future jobs’ growth – to marry up today’s incentives with tomorrow’s needs.
But what will the next intervention from the Government need to be? Mr Sunak intimated that in their minds the third phase – which will cover rebuilding the economy – will be in the Autumn, mixed in with the main Budget and a Spending Review. That for me, will be the chance to be truly transformational.
However, the unpredictable nature of the virus, about which we still don’t understand an awful lot, will surely mean more phases and interventions, both proactive and reactive, as we get to grips with the reality of the economic impact it has had.
The private conversations I keep having with businesses are increasingly turning their attention towards the turn of the year. With the job retention scheme due to end in October (end of Q3, calendar year), we should then begin to see how the true unemployment figures look. If a second wave hits around the same time of the flu virus, then it’s hard to envisage what the Government will do. To that end, and wherever possible, businesses will need to be preparing longer runways than they may have previously anticipated. I’m cautiously optimistic.
Update 30/06/20 – The 2020s – the decade of dexterity
Next month will mark a year since Boris Johnson became Prime Minister. And by the time we reach that exact date (July 24th) it’s fair to say we will likely see the course firmly set for the remainder of this Parliament.
Today, the PM will kickstart the process with a speech on his policy intentions, focused on delivering infrastructure to get Britain building. And a week or so later, the Chancellor will unveil the stimulus needed to deliver that ambition (An expansion today for one of his earlier schemes – the Future Fund – can be found at the bottom of this blog.) If the 2010s in the UK were defined economically by austerity, the early years of the 2020s will be similarly defined by dexterity, as we seek to physically rebuild our economy.
There’s an interesting ideological decision around how the Government seeks to invest its way into growth. Tech purists would argue that the government needs to think more like them. Take chances, accept some will fail, regroup and go again. Daniel Korski espouses as such in a recent article and it’s true, we do need to accept that in pursuit of leadership, some proposals will fail to make the mark. But, as Michael Gove, clearly on the reformist warpath himself, pointed out in his Ditchley lecture on the privilege of public service over the weekend, there is still a seduction for Government “to applaud the gracefully performative and overlook the boringly transformative,” with success “measured by the sound of applause in the village, not the weight we lift from others’ shoulders,” a process he eloquently argues against in his lecture.
Mr Gove is right that the process of policy making, with the too-swift judgements that are often made by commentators and industry themselves; the exposure to media and public ridicule that entails; and the meaningful examinations of the National Audit Office and Public Accounts Committee afterwards, do reward a safety first approach. And he is equally right to want to break them.
I am so keen to see and support a new direction of policy making, which is rigorous but more risk averse. The UK has a proud history of innovation and in recent years we’ve seen huge strides in the environment to encourage them. Government has grown more digitally ambitious and empowered regulators to do the same. I will support an extension to such an approach in the recently announced Digital Strategy, a document expected in the Autumn. The Digital Secretary made the announcement in a speech last week to the Tech Cluster Group, a group that does genuinely excellent work in many local areas and which helps to prime businesses ready to access the national network of programmes that Tech Nation delivers.
Update to the Future Fund and Innovation competition
This week, two policies that in ordinary times the Treasury would have considered ‘contentious’ are extended.
Future Fund – Tranche 2:
The Future Fund has been expanded to allow UK companies with overseas parent companies access. Giving UK cash to US owned companies isn’t going to be without its critics, but there are many companies that do contribute significant amounts of jobs in the UK but, for reasons related to accessing non-UK accelerator programmes on their growth journeys, have to date been ineligible. The Treasury, keen as ever to ensure this is accessed appropriately, have lengthened the criteria for such businesses.
The Fund, which matches private sector investment, has to date approved more than £300m of convertible loan notes and, with the figures on its distribution last week, done so to a good spread of companies across the UK, rather than the overly London concentration that many feared. Importantly the Fund remains very much open for UK businesses too, showing the ongoing willingness of the Treasury to support the tech sector.
Innovate UK’s Sustainability Innovation Fund:
In a second update, Innovate UK announced a £200 million Sustainable Innovation Fund to support R&D intensive businesses. The money is part of the £750m package announced in April. Welcome though it is, the money will be accessed through a ‘competition’, meaning those with shorter runways should be somewhat wary of the lengthier process this will involve.
Reminder that if you are a scaling digital tech business focused on sustainability and helping the economy reach net zero ASAP, then please do not forget to apply to our latest programme; Net Zero 1.0 – a brilliant new 6-month long programme focused on helping scaling leadership teams grow through peer-to-peer engagement, and sessions with business leaders in this field. We also have opened applications for our second Applied AI and third Fintech scaling growth programme. More here.
More details on the initiatives discussed can be found here:
Future Fund extended
Innovate UK Sustainable Innovation Fund
Update 20/05/20: Future Fund now live for applications
From Mike Jackson, Tech Nation’s Entrepreneur Success Director – This morning, the Future Fund has gone live and is accepting applications. Eligible companies will receive matched funding of up to £5 million, with the Government stake in the form of a convertible loan,
In Monday’s update, Gerard wrote about the trade-offs the Treasury had to make in order to get the money out whilst complying with EU State Aid rules. In particular, this applied to the EIS compatibility, which the Treasury were unable to square off with state aid restrictions. The government has committed to amending the rules of EIS to protect Future Fund investors from losing relief on their previous investments made prior to any investment through the Future Fund.
For those worried that the UK is the only country concerned with state aid law at present that is not the case – this TechCrunch article shows the problem it’s causing a number of EU countries as they respond to the pandemic.
However, the Treasury has ensured that Enterprise Capital Funds are eligible for the scheme, which will help many companies who have already taken some public money through investment schemes. The Chancellor also told Parliament that whilst initially worth £500m (£250m a piece for Government and third party investors) he would seek to match further demand if that cap is exceeded. And of course, these remain extraordinary times, so if teething problems with the scheme emerge, the community and the Government will seek to understand and, if appropriate, address them speedily.
The application process is available here and is on a first come first serve basis. One key area of concern to all is that the fund is accessible to a range of diverse businesses and founders. This excellent piece on Medium outlines key and urgent actions that the matching capital groups should be taken to help ensure this is the case.
Interested parties can raise questions not addressed through the FAQs by emailing here.
Other schemes also continue to flow.
- UK lenders have distributed money to more than half a million UK companies so far, with over £14bn lent in the form of bounce back loans and £7.25bn under the CBILS scheme.
- A new £40 million Fast Start Competition has been set up to drive forward new technology ideas.
- The Treasury has raised the amount mid-sized companies can borrow through the coronavirus large business interruption loan scheme to £200m, up from £50m. The changes come into force next week.
- The Treasury and the Bank of England also announced that from 4 June they will publish a weekly list of the companies who have accessed the Covid Corporate Financing Facility and how much they have borrowed.
- The Furlough workers scheme has now been extended until October, with a taper for those that want to bring part-time workers back in August.
Update 18/05/20: Future Fund is opening for applications
Following the announcement of the Future Fund back in April, the Chancellor has announced that it will now be ready to accept applications starting from Wednesday.
As many of you know, the Future Fund will provide government convertible loans to innovative UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors. The initial commitment from the government is £250m, which will be unlocked by additional third-party investment on at least a match funding basis.
I do acknowledge that many of you will be concerned about the details of the term sheet, particularly with regards to EIS compatibility and the qualifying criterion of £250k, raised over 5 years, which might prove to be more challenging for certain start-ups, however we recognise that HMT has worked tirelessly over the past few weeks to ensure that as many businesses can access this much needed liquidity as possible.
We particularly welcome the announcement over the weekend that Enterprise Capital Funds are now deemed eligible for Future Fund investment. This will benefit many companies across the UK who have been previously supported by national and regional investments funds, increasing the diversity of applicants.
The application process also appears relatively simple, with investors being able to apply directly onto the British Business Bank platform, alongside the companies themselves. Investors who meet a wide range of criteria can apply, so that both angel investors and crowd-funding platforms can participate. The process is investor led, and the platform does not match companies seeking funding with investors.
We are confident that businesses across the country will be able to benefit from this scheme, and encourage as diverse a pool of applicants as possible to apply.
The full details of the scheme, including the eligibility criteria and how to apply can be found here.
Update 05/05/20: Two more support packages; a new loan scheme for micro-entrepreneurs and new grants for small businesses.
Two weeks on from the Government’s £1.25bn package for the tech sector and the initial feedback has now been distilled into a series of sensible questions that we hope the Treasury will be seeking to address in order to ensure optimal delivery.
Both of the schemes that comprise the overall package — the Future Fund + InnovateUK’s loans and grants — are due to go live shortly and it’s been all hands to the pump to get the fine points right. We must keep making the case as to how these schemes can work for tech businesses.
Eligibility for the Future Fund hinged on the flexibility of the term sheet – what kind of shareholder will the Government be and what type of match funding is allowed. For example the qualifying criterion of £250k, raised over 5 years, could be more challenging for non-London start-ups and funds that have invested using the EIS scheme, whilst there remain questions over whether businesses that have been previously invested in by some devolved nation funding schemes can access it all.
Meanwhile, for the InnovateUK grants, the question was more one of identifying and encouraging the right kinds of businesses to apply. One offer we made was for a steady deal flow through our own Entrepreneur Engagement Managers, who are plugged into local ecosystems across the UK.
Whether these schemes fulfil the short need, or the longer term government priorities, is important but neither were specifically designed as part of the Government’s wider levelling up agenda. Yes, it is important that the differences in funding between London and the regions is not exacerbated if possible, but these schemes aim to work with the current proportionality, not actively to reduce it.
Nevertheless, even to protect the status quo is difficult, which is why this is shaping up to be such a crucial month for a new tech policy. With recent Beauhurst data showing that UK scaleups are especially vulnerable at a time when £18.9bn of equity investment is identified as being at moderate to critical risk, there is a lot at stake.
A Discretionary Fund for small businesses
Over the weekend, the Business Secretary and the Minister for Regional Growth and Local Government, announced that £617m would be made available for startups and small businesses with ongoing fixed property-related costs. Payments will be allocated by Local Authorities but Government guidance has indicated that priority should be given to businesses in shared spaces. In order to be eligible, companies must have fewer than 50 employees and demonstrate that they have had a significant drop in income due to the lockdown.
We will keep you updated as and when further guidance is issued to local authorities on how these funds will be deployed.
A new loan scheme for micro-entrepreneurs live:
On Monday last week, the Treasury issued a new loan scheme targeting small businesses. Arising from the feedback in accessing the Coronavirus Business Interruption Loan Scheme, the new 100% taxpayer-backed loans will allow up to £50,000 and be delivered in days. The scheme promises simplicity, with an online two-page self-certification form. Small business groups such as the FSB and BCC have welcomed it. It went live yesterday morning and neither group will be reticent in coming forward if it doesn’t immediately work.
Altogether, the scale of Government investment is sizeable. It won’t reach all companies – the Government is open on that – but it shows a vast, unprecedented effort to work across many sectors and business stages to deliver as much help as it can. We’ve updated the Covid-19 hub to provide all of this latest information.
Finally, our UK-wide Tech Nation Talks are ongoing, with events last week for the South West and North West, and next week for the North East. We continue to gather feedback from those to help with discussions with Government on the sector. Do be in touch with your regional Entrepreneur Engagement Manager if you want to attend.
Finally, today we will be holding our ‘Lockdown Unlocked’ event. The online event will give scaling leadership teams the opportunity to get first-hand guidance from government experts and build a support network through our online event platform. It’s an opportunity to support, not just the companies on our programme, but the wider tech community in these trying times.
Update 23/04/2020 – New Treasury funds are justified – and will need to be flexible to deliver the greatest impact.
The Government’s announcement for startups on Monday was a bold move. Bold, because it’s never been done before, and it comes with some complexity.
There has been a mix of reactions to the two Treasury policies that launched earlier this week. And of course this is somewhat expected; no policy is ever perfect. Nonetheless, I thought it would be helpful to lay out why I believe they are necessary.
The £1.25bn fund, launching in May, includes:
- £750 million of loans and grants for innovative businesses and;
- up to £250 million from the Government for an investment fund for high-growth companies — match-funding private sector money to take the total fund to £500m.
The Coronavirus Business Interruption Scheme (CBILS), as I’ve said repeatedly, is in principle a good intervention for a large demographic of businesses and has been put together impressively quickly. It will benefit from having an ever wider array of lenders on it and I’m pleased to see some of the recent fintech additions such as Future Fifty’s Funding Circle and OakNorth. But it still cannot tackle pre-revenue scaling businesses.
The biggest criticism I see levelled at the new Future Fund is that it is unnecessary. The argument goes that private capital will back businesses and if it doesn’t they aren’t worth backing. But that misrepresents the unique situation which necessitated this intervention.
Firstly, this is not the same as the financial crisis in 2008 or the technological shock in 2000. This is a societal crisis, which is precipitating a financial crisis. Further, it is an enemy with an unknown origin or trajectory — against which there is no current solution.
The financial crisis, as dreadful and impactful on lives as it proved to be, was a finite one, with clear sources and fixable problems. In 2008, private capital started to flow into fintechs, a flow that has turned into a cascade in recent years. Investors saw what the financial services needed and where that innovation was coming from and they backed tech.
It is near impossible to predict how Covid-19 will impact different sectors and how they will respond. At the moment, it is impossible to know whether further lockdowns will be needed in the future. In short, it will impact more widely and for longer on every aspect of business. Investing is less about understanding the viability of a business and more about the health of entire economies. In that context, I find it understandable that private investment is stalling.
Yes, some deals are being done – and some sizeable ones too – which is great news for the tech sector. But many more rounds are falling or have fallen through. Growing businesses with limited runways need to keep that cash flow going. With investors understandably hesitating, the Government’s support is needed.
It bears repeating that last year the UK recorded more than a third of all investment into tech in Europe. Year on year, inward investment pulls further ahead from many international countries. The UK was third after US and China for inward tech investment. We have to continue to back the sector to maintain that. Anyone looking at international comparisons will have seen a number of schemes launched in France, Germany and the US which were specifically targeted at tech. Whilst I don’t believe in following others for the sake of it, the government’s intervention has delivered a timely message to UK and international businesses and investors, that we continue to back this important sector.
In the coming days the Treasury has some important judgments to make on how this scheme will run. The minimum a business needs to have raised has been set at £250,000. Dealroom data would suggest that it would allow it to cover a significant proportion of small tech businesses. To achieve that figure, we need the policy to reach across the UK. Breadth of investment type will be key to ensuring a wide demographic and geographic reach. There are also important questions to be answered around what kind of shareholder the Government will be in the future. And of course there will need to be an effective but smooth distribution mechanism.
We are involved in all these discussions and will continue to work with our sector to strive for the best possible outcome.
Headline terms for the Future Fund are here.
Details of all financial support available can be found here.
Plus don’t forget to take a look at our Covid-19 Information Hub for resources and webinars on:
- Fundraising in a Lock Down
- Managing remote teams
- FinTech & Insurtech Outlook with Treasury Minister, John Glen
- And much more.
Update 20/04/2020 – Vital new funds targeted at innovation will be released by the Treasury
Overnight, the Treasury has announced a significant new intervention to support lending to startups and early stage scaleups. I know the Treasury has been working day and night over the last week figuring out how best to deal with this unprecedented challenge. There are different schools of thought on how much government should get involved and how, in tech startups – which tend to be high risk. But these are historic times. Tech startups and scaleups are crucial to the UK’s future growth, jobs and innovation.
Here’s the detail we have so far. The £1.25bn fund includes:
- £750 million of loans and grants for innovative businesses and;
- up to £250 million from the Government for an investment fund for high-growth companies — match-funding private sector money to take the total fund to £500m, and convertible loans into an equity stake if not repaid. So the fund will be £500M in size, 50/50 split between the private and public sectors.
Those familiar with our work at Tech Nation will know that over the past few years we’ve repeatedly been able to publish record investment figures for UK tech due to its robust ecosystem. In fact, last year, the UK recorded more than a third of all investment into tech in Europe. In short, it is a phenomenal success.
That’s why, as it’s become increasingly clear in recent weeks the enormous impact this virus is having and will have on businesses. To give due credit, the Government was quick out of the blocks to introduce measures to support business. This came first with the Coronavirus Business Interruption Loan Scheme (CBILS) – a well-intentioned loan scheme that stood up quickly (though not without its glitches when it came to deployment) and is beginning to reach a few more businesses, especially now, with challenger lenders such as Oak North and Funding circle now on board. The scheme was coupled with the employee retention scheme.
But a gap remained for businesses that couldn’t access CBILS, with banks unwilling to lend with exposure of 20% of the loan value. And many other businesses were not eligible as they remained non-profitable. This has been an acute problem in the tech sector.
The need for further intervention intensified when it became clear that other countries were going further for this important segment of the business community for obvious reasons.
I’m pleased that the Treasury has now made this additional and bold intervention. Bold because it’s never been done before. There will naturally be questions about the detail and implementation. Much will depend on the intelligent allocation of capital and a careful balance across different funding structures and geographical regions.
So, here’s what we know:
Firstly, the £500m investment scheme will launch in May (we are seeking clarity on an exact date) through the British Business Bank. It will provide UK-based companies with between £125,000 and £5m of Government funding, with private investors matching (or bettering) their side, as long as the company has previously raised equity from a third party. It is a convertible loan, so if it cannot be repaid, the money will convert into equity.
To all the founders and funders who have been in contact with my team and I over recent weeks, please look closely at this scheme to see if you can make it work for your needs. The eligibility criteria has been set that a business must have raised at least £250,000 in equity investment from a third party over the past five years.
Secondly, the £750M of targeted support for R&D will be available through Innovate UK’s grants and loan scheme, allocated if your company passes an ‘innovation assessment’. Details to be made available.
Key now will be meeting the deadlines for these schemes going live, ensuring they are accessible and that a wide range of investors can take part in the co-investment fund.
Our team will be in touch with current cohorts and remain accessible to other tech businesses if you need more details, or have feedback on these new proposals.
The information you provided us through the surveys we conducted in March and early April and your messages to date have been invaluable in providing the necessary evidence to demonstrate a key gap in the business support package, into which the Treasury has now thankfully stepped in. Read the terms in full.
Update 15/04/2020 – An announcement on further lending shortly?
This blog has been a little quieter over the past week for a number of reasons. Firstly, with the PM in hospital (and now thankfully discharged), the Government has some major challenges it has needed to address. But it’s also because we were anticipating by now to have had some formal announcement on a further government intervention.
Those who have read this blog over recent weeks will know that we have evidenced a sizeable gap in the current, generous lending schemes from the Government. And whilst we have praised the speed of delivery of interventions under the British Business Bank, there remains an issue of eligibility for pre-profit and high growth tech businesses.
We know that Government Departments are well-briefed on the issue and understand the need to make an intervention. It is the form and timing of that intervention which is being discussed. I know that many companies I speak to are hopeful of quick progress now.
So it was good to see a hint of the government looking at 100% backed loans during the Chancellor’s Covid-19 conference last night. We had the same message from the Economic Secretary to the Treasury, John Glen MP, during a Fintech webinar we ran yesterday.
The webinar we held did unearth some good news stories around venture capital, with a number of reports of businesses still managing to close rounds. So, if the Treasury is on the cusp of announcing something, I feel it would be helpful to formally let the sector know a policy is coming. That might help give VCs more confidence to invest in the short term, with the knowledge that the businesses they support with investment will be supported by the Government down the track. Getting that VC investment in now is the lifeline some of these tech businesses will need.
There have been further positive steps too. The Chancellor confirmed the scheme for furloughed employees would be starting in less than a week and a few businesses have been in contact to say that R&D tax credit claims are being made very quickly (I hope that’s the experience of everyone). It has been good to see OakNorth and Starling accredited under the CBILS lending scheme. Finally, do take a look at this resilience grant scheme being run by the Government – grants of up to £50,000 are available.
However, yesterday also saw some sobering economic assessment from the Office for Budget Responsibility. We knew there would be serious implications for the economy but we now have a potential number to put against that – a retraction of up to 35%. It’s clear we can’t protect all businesses and jobs from this but, if the bounce back is as quick and impactful as the Chancellor hopes, then the sort of bridge funding the sector has been calling for will be well worth it, and see many otherwise viable companies through to better times.
Update 03/04/2020 – Loan reforms may need to go even further
Loan reforms may need to go even further
Overnight, the Government has taken further action to support firms affected by the Covid-19 crisis.
The main change seems to be that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible. Lenders will also be stopped from requesting personal guarantees if the loan in question is below £250,000.
The changes will mean more businesses can access this scheme and whilst that is welcome, it does not appear at first glance to address the issues we have been hearing from early stage, pre profit tech businesses, that lack the trading history for banks to consider them viable propositions. As you might expect, there are a number of meetings today in which we will raise these issues with the British Business Bank to understand the current situation.
It is important to remember that for many companies, now is not the time to panic. They will have enough runway to see out enough time for the virus to pass, at its current trajectory. Hopefully, many will also have wise enough Venture Capital to ensure, whilst bootstrapping, the businesses get through the tougher months.
For others, that runway is shorter and I can understand the frustration in not currently knowing where to turn. Yesterday’s Beauhurst data release showed the stark reality of the investment figures in the sector. The known deals in March totalled £595m, compared to £1.46 billion a year earlier.
The Coronavirus Business Interruption Loan Scheme is a good, speedy product for a big demographic of businesses in dire need. Nevertheless, it is an avenue where the eligibility criteria will mean that a significant proportion of the early-stage sector will fail. Startups and early stage scaleups aren’t built to be profitable immediately, but to reinvest and reinvest as they hope to continue to scale.
In conversations with businesses, our programme leads are bringing back a wide range of situations. However, nearly all businesses we speak to would welcome some kind of cash injection, whether that is simply to bootstrap the company until the crisis is over or for others to actually invest further in their product ready for an improving market. However that money is spent, I recognise the importance of remaining competitive with rivals, both domestic and overseas.
I also appreciate its not just finance but cash flow as well. I am hopeful that we will see some further movement on business rates and perhaps some work on speeding up the R&D system over the coming days.
I don’t believe the Government is ignoring this but an intervention is hard to target correctly. At Tech Nation, as with the wider tech sector, we continue to gather evidence and provide statistics, case studies and analysis to inform policy makers of the needs of the tech community. You are not alone in your fight.
Update 01/04/2020 – Could the crisis overcome our big data fears?
You may have seen some of the announcements last month by some of the household names of US tech cracking down on misinformation around Covid-19.
In truth, a lot of this has been developing slowly over time. Misinformation – whether accidental or ill-informed – sits alongside and often overlaps with disinformation, the deliberate pumping out of advice intended to deceive or confuse the reader. At the innocuous end of this scale would be your typical April Fools’ joke. At the other end is content that can be incredibly harmful. From purported Russian influence in election campaigns to more recent attempts to crack down on stories around anti-vaccinations, the internet is awash with these kinds of fiction. However, COVID-19 is the first significant issue with global reach to bring it into our collective consciousness.
For its part, the UK Government set up this week a new unit to tackle misinformation about this virus. The ‘rapid response unit’ will operate between Number 10 and the Cabinet Office, seeking out and challenging a range of distorting narratives online, whether deliberate or not.
Capturing less media attention but instrumental behind the scenes, many UK companies are playing an increasingly influential role in this online war.
Serelay, based in Oxford, allows users to capture videos and photos that are inherently and immediately verifiable, meaning they can be used by third parties in the knowledge that they are authentic. Verifying an image as it is taken protects against some of the doctoring that can occur at a later date, a sort of digital fingerprint. Serelay says it can detect an edit of a single pixel.
Wordnerds, a SaaS business from Gateshead specialises in AI and linguistics to provide businesses with accurate and insightful feedback on their services. In the current crisis they are already listening for COVID-related stories on behalf of customers.
Astroscreen, a London-based company, also uses AI to seek out fake accounts online. Its founder, Ali Tehrani, is open that one of the ways the company does this is through targeting usernames, which are often generated at pace and at scale, meaning they follow certain patterns to create so many different mantles. Last year, the company was responsible for unearthing more than 2,500 fake accounts as part of a disinformation campaign in Hong Kong to discredit protestors.
Whilst it is beholden on all of us to be cautious about what we read and choose to believe, it comes as reassurance to me that British tech is sitting underneath the efforts to combat the widespread dissemination of misinformation.
It is certainly good for the UK tech sector; AI was one of the key areas to have benefitted from sustained and record investment into UK tech in 2019. With lending and venture capital currently under intense scrutiny, it seems a different age that the UK was pulling in more than £10bn of investment into its tech companies. But that’s exactly what we achieved in 2019. In the first six months of 2019, AI funding had already surpassed the total invested in the sector in 2018. And by the end of last year it had reaped over £2.4bn, more than double the previous year.
You may not always see their names in the headlines, but British AI is underpinning global efforts in this important battle.
Find Covid-19-related business support and resources on our Covid-19 Information Hub.
Data – it’s availability, aggregation and applicability for delivering solutions – is at the heart of efforts by Government to understand the spread and maintain control over Covid-19.
First and foremost, healthcare data is essential and I’ve previously highlighted some of the UK companies involved in using AI to support work in this field. A few days ago, NHSX – the unit within the health service tasked with its digital transformation – published a blog outlining the power of data in a pandemic, and their plans to work with Google, Microsoft, Palantir and AWS as well as Upscale 3.0 alumni Faculty, to deliver a data platform for the NHS. It’s a fascinating read about the temporary aggregation of disparate forms of data which are harmonised and then used by the private sector to match scope (how fast the disease is spreading and where) to interventions, from availability of ventilators to sickness absence in hospitals.
Matthew Gould, who heads up NHSX and previously the digital directorate at DCMS, is a great advocate of the role of tech in tackling public policy problems. His team is well aware of the importance of data in this crisis and the need for an authoritative, responsible and secure repository body to own it. The intention is to open up as much data as possible over time – both to support public understanding but also tech solutions. If deployed successfully, this could be the new benchmark or tech driven solutions to other public policies in the years ahead.
Data is also invaluable to Government in understanding the impacts of Covid-19 on society. The retail headlines today are about grocery sales at record levels and removal of restrictions on some products. But for more nuance I would cite this less obvious use of data that gives insight. Future Fifty 7.0 company Starling Bank have seen grocery shopping payments moving to delivery over time whilst panic buying is reducing. It would seem we are getting more accustomed to the new normal.
Equally important is studying whether the social distancing message is getting through. It may appear a little illiberal for Government to get this data, but it’s anonymised and no different from the processes that help your satnav to predict the quickest route home.
Across the board, the pandemic we are experiencing is as good a call to arms for opening up more data as we can have.
I wanted to end this blog today by directing you to the results of a survey about how the Coronavirus is impacting tech companies. You can read a separate blog on some of the headlines for that survey – thank you to all those that took part.
Finally, we have also updated the COVID-19 information hub page – pulling together an extensive hub of business support and information for the tech industry, to help you get through these challenging times, including links to further Hubs by tech.uk, Scaleup Institute, Enterprise Nation, British Business Bank..
New Gov links which have showed up in the last 24 hours:
New Welsh Gov support in the form of a £500m economic resilience fund.
UK government support has also been updated.
You can see all the main links and information in the Covid-19 Information Hub.
Every revolution that has come and gone – from the steam engines of the first to the streaming engines of the fourth – has elicited fear of what it might create. But the truth is that each of these industrial revolutions has changed our lives in ways for the better that, only years earlier, could not have been conceived. Innovation moves ever faster than law so it’s natural that regulators chase the curve. But net, technology has always driven improvements to society.
People often talk about the importance of institutional memory – spending time in a business to truly understand its purpose by knowing its history. Well, I think there’s an equally compelling case for the importance of industrial memory. We think of tech companies and their founders as revolutionaries, and of course they are. But as importantly, they are also evolutionists. Because without the trailblazers of the past we wouldn’t have the pioneers of the future. Without Alexander Graham-Bell, no Tim Berners Lee. Without Ada Lovelace, no Alan Turing. With no Alan Turing, no Demis Hassabis.
So whilst UK entrepreneurs have been at the forefront of almost every iterative stage of technology, they are always standing on the shoulders of giants past. As healthtech companies help us to diagnose this virus, AI helps us to treat it, remote working helps us to stay business focussed and Deliveroo pivots to deliver medicine as well as Mexican, now more than ever the pioneers of the past must be remembered for the initial – and in some cases colossal – first steps that they took.
And so, there are some positives that come out of this horrendous situation. One of those is the wide realisation that technology is for purpose, as well as profit. It always has been.
Update 27/03/2020 – Managing exponential growth during a crisis
I’ve been inspired by the collaborative innovation that is happening across the UK and across the world. Borders have shut but ideas and new communication channels have opened. Our team has written a blog showcasing some of the open source innovation work going on to tackle the virus. Our Covid-19 information hub contains other ways companies can get involved and continues to be updated.
I know that businesses are struggling. Many are in touch with me directly as customers and capital start to drop off. Those reading this blog in the past few days have seen me highlight some of the problems we are hearing from across the country and some of the potential solutions. We’re grateful to those that have responded to us via surveys, seminars or one-to-one conversations in providing those. We understand the pressures you’re facing.
Today though I wanted to end on a more optimistic note. Because there are a number of tech companies at the other end of this spectrum – businesses that are experiencing unprecedented, massive and immediate increases in their customer base. That creates its own pressures.
And how those are managed is crucial – it can make or break a businesses proposition or customer base. Ocado is a hugely successful company and couldn’t have predicted the incoming tsunami of new customers at such a high rate. I have seen comments about them explode on twitter but management agility is beginning to turn this round and I understand they have started to roll out a new way of working, allotting random groups with stated times to access, put together and order their essentials on the online shop.
Companies like Halo are experiencing a similar kind of pressure. As groups around the UK self-organise to support the most vulnerable, Whatsapp groups have sprung up everywhere and carry some risk. When local MutualAid groups make their links to join public, they risk exposing both phone number and approximate location of volunteers. Many are instead picking Halo’s messenger as a safer way to set up community groups for streets and borough-wide topics to help the most vulnerable. They’ve seen a 100% growth on engagement rates this month and are nearly covering every street in some areas of London. You can find out more here. The founders have a track record in building networks capable of scaling rapidly into the millions.
There was also an extremely insightful twitter threat from Slack CEO Stewart Butterfield, who has charted how Slack is coping with massive demand. Virus-enforced remote learning has seen companies investing heavily and at short notice in this popular, instant messenger platform, accelerating a seven year plan into months.
Stewart is very clear that organisational agility is the key business advantage in a global world that can change so fundamentally and so quickly. The businesses that can best survive and in some cases thrive in current conditions are those whose teams can pivot quickly to new ways of working that fit with the changing environment.
Update 26/03/2020 – Government interventions yet to plug the early – stage business gap
The Chancellor has now announced a further intervention to support the self-employed.
Seeking to be as equitable as possible, he has pitched the levels around the furloughed worker scheme, with the same 80% cap up to £2500. Due to the complexity, he said he expected the scheme to be accessible by June.
Whilst clearly plugging a sizeable gap in the policies announced to date – the freelancer community play a key part of the tech ecosystem – I expect louder noise from those sections of the business community that are still not covered.
I highlighted one of these yesterday – the option for Government-backed or direct investment into pre-profit firms through convertible loan notes. That would help meet the needs of many fledgling businesses that are showing great promise to be major employers in the future. Interestingly, this morning’s papers picked up on the asks of some lenders under the new Coronavirus Business Interruption Loan Scheme (CBILS) for personal guarantees.
Perhaps this shouldn’t be a surprise – the CBILS scheme increases the proportion of Government-backed debt to 80%, from the 75% that was backed under the Enterprise Finance Guarantee scheme. That 5% increase might move the dial for some but probably not many – 20% if unsecured lending still represents a risk for major lenders.
I’m interested in how the British Business Bank can work with the UK’s great fintechs such as Funding Circle, LendInvest and OakNorth to get them registered more quickly for funding schemes like this. I know some are in the queuing process. The appetite and institutional safety should now be there and UK is genuinely leading the world in fintech solutions.
We shouldn’t bash the banks on this – they are showing the natural reservations from the traditional system and this loan scheme will work for large sections of the economy, but it’s becoming increasingly clear that it can’t work for an important part of the tech sector. We can and should throw our efforts behind newer lenders, unencumbered by the same difficulties, who might willingly step into the void.
Update 25/03/2020 – Young tech businesses need targeted support
The Government response to Covid-19 has escalated quickly, with their two main packages supporting cashflow and staff now live.
Speaking to founders across the tech sector from early-stage scaleups to some of the UK’s most established tech companies, from Belfast to Brighton, it’s clear that to a large extent the interventions are welcomed and hitting the mark. Nearly 3 in 5 businesses we surveyed were planning to access either the Coronavirus Business Interruption Loan scheme (CBILS), the Coronavirus Job Retention scheme or both. Their calls were for speed, simplicity and widened eligibility.
There are gaps that remain. An obvious one is the self-employed with the Treasury purportedly finalising a package tomorrow. Another are pre-profit startups. Our data threw up the fact that startups and early-stage scaleups, often pre-profit, were the segment of the tech business community least likely to access either – in fact this applied to 4 out of every 5. Some of this can be explained through a perception lag due to historic efforts to galvanise lenders to lend to this distinct group. The British Business Bank does expect some unsecured loans of up to £250k to be available for earlier stage non-profitable scaleups although these are subject to the risk appetite of individual lending providers.
But there is clearly a major issue that is yet to be resolved for many young businesses who have limited, if any, collateral against which to loan and are still months or years away from delivering profits. Many growing businesses have founders who will be individually liable for debt and, if they’ve recently raised VC investment, may require permission to access – or even be entirely precluded from accessing – debt. As a result, it’s increasingly clear that a large number of the scaling tech companies we support will not be able to access the loans offer through the British Business Bank.
The good news is there are a number of policy proposals floating round that could address this. The solutions are coalescing around Government-backed investment directly in these firms either through a traditional equity investment or Convertible Loan notes. Such a scheme would be an investment by the government rather than a grant where there are zero returns to the public coffers.
Our survey showed little regional disparity on the problem here, so identifying the right tech companies in the regions will be key to any new policy intervention. Tech Nation’s national network has identified 2,400 companies right across the UK that may require short-term cash flow support, runway extension, in these challenging times. With our 11 regional Entrepreneur Engagement Managers we are well placed to identify those companies in need and direct them to the solution.
It is clear that for startups at least, more specific support must be provided if we want to fuel this fast-growth and high-value sector of the UK economy.
For the latest updates of government business support for tech companies and community resources, visit our Covid-19 Info Hub.
Update 24/03/2020 – Survey initial results show how Government support is needed
I wanted to share the results of a snapshot survey last week of one hundred founders of the Tech Nation alumni (click here to take out follow up survey). The survey, taken after the £330 billion Government injection into support but prior to the employment support package. It showed that cashflow and ways to create it were unsurprisingly the number one priority for tech businesses, with 9 in 10 businesses reporting this as their focus.
The key asks were for speed, simplicity and eligibility which well-intentioned – and for the large part well-executed – Government schemes of the past have not always met.
We have been staying close to the briefings of the new schemes launched to mitigate the financial impact of the virus. Indications are that the British Business Banks’ Coronavirus Business Interruption Loan Scheme, which went live yesterday, will both accredit lenders faster (there are 40 approved through the scheme as it launches today with more coming through an expedited process) and encourage a quicker lending process. They’ve also confirmed that 100% unsecured loans of up to £250,000 will be available, though not universally through all the lenders, preferring to allow individual lenders to show discretion on a case by case basis.
Of course, government support is just one part of the cashflow jigsaw. Many founders report that VC funding is stalling and some deals are falling through completely. Tech Nation is looking to address some of the worries caused by this crisis through a series of online seminars with our founders – last week we held two such meetings on fund raising and one on remote staff working during a crisis and further such seminars will be made available over the coming weeks.
An updated survey is now live, seeking to capture a little more detail by business size, stage and location. Please do take it by visiting this link. Every response helps the industry’s efforts to highlight to Government what is and what is not working, at a time when we need to ensure we make any necessary changes quickly. Your responses will directly impact the support available.
It’s times like these that adaptable leadership comes into its own. Everything we teach in our cohorts is aimed to improve management and leadership skills, which we know are crucial for tech companies to be globally competitive. Adaptability and creating the company culture to embrace that are the key skills for scaling companies.
Update: 23/03/2020 – Eligibility of ‘viable’ businesses will be key to loan success
From today, many businesses are able to access government support as a range of financial products go live. Please see our updated government links below on how to find details on the Coronavirus Business Interruption Loan Scheme (for SMEs) and the Covid Corporate Financing Facility (for larger corporates). A new BEIS website has also been set up to bring this all into one place. You can visit that here and a separate section that includes additional help from non-government organisations here.
We’re aware that speed and eligibility are the key questions many tech businesses have. On a call with the British Business Bank today our team was able to confirm that 100% unsecured loans of up to £250,000 will be available, though it will be up to individual lenders (there are 40 approved through the scheme with more coming) to show discretion on an individual case basis, taking a view that it was a viable business prior to the crisis. The loans can be obtained in addition to any EIS or SEIS scheme that a business has taken part in which is a useful addition.
On speed, the BBB is aiming for a swifter, smoother process but as a new product, there will be some teething problems.
Of course, I know too well the unique circumstances of many pre-profit tech start ups. We welcome any experiences you may wish to share over the coming days in ease or otherwise of accessing this funding and we continue to survey the sector for views on what further products might be needed. You can take that survey here.
Whilst we are awaiting whether there will be more intervention for the self employed, Covid Credit has been set up (as a proof of concept) helping self-employed workers to demonstrate their loss of income from Covid-19 to HMRC.
With self-isolation increasing healthtech companies are coming more into the public eye. Babylon Health, one of the latest cohort of our Future Fifty programme, is rolling out a symptom checker for coronavirus. BenevolentAI, also a 2020 Future Fifty 8.0 member, is busy using AI to crunch vast amounts of public data to see if existing drug combinations could provide any interim help to patients ahead of the development of a vaccine.
Other companies will also be actively considering how they can pivot their services to support the fight. As a few examples, Amplyfi (Upscale 5.0) mix AI with data capabilities to help scan the deep web for insights, Crisp (Future Fifty 8.0) is a cutting edge Social Media safety and crisis monitoring firm, that can help identify, understand and inform early interventions on growing societal issues. Thriva (Upscale 4.0) could help with health monitoring from home. CausaLens (Applied AI 1.0), an AI-powered prediction engine could help with staff and bed allocation during a time when the NHS will be under pressure like never before.
NHSX has sought to catalyse this area of tech further today in a new partnership with PUBLIC, called Techforce 19. They will award funding of up to £25,000 for a test phase (and potentially deployment) of a project that supports the elderly, vulnerable and self-isolating. Applications close 31st March.
As ever, any support you can offer please use the links in the government support section further down this blog.
Update: 20/03/2020 – Tech Nation is taking its programmes online
The Chancellor has just finished outlining additional measures the Government is taking to support employment during the months ahead. We recognise that speed is of the essence in getting this money out so we recommend you take a look at the new proposals, which are summarised below, to understand how they can support your specific situation.
We have also updated a survey questionnaire to take account of these. Please take it and give us feedback on how the crisis is impacting you, including how and whether the Government measures are helping mitigate the effects. This data from our tech community is invaluable and it will be used to give feedback to the Government on their announced interventions and to inform any future ones.
Amidst many of the difficult stories you have shared with me, I have received countless examples of how tech is stepping up across the country. I’ll release a specific blog on this over the weekend but please do keep these initiatives coming.
For our part, Tech Nation has successfully run the first three online digital events covering remote staff management and fund raising during crisis periods. We will continue to grow such opportunities for our networks over the coming weeks. If you are in the middle of a fund raise, we have also put this blog together, following one of those webinar sessions with over 100 founders and CEOs yesterday, who are doing precisely that. Hope it’s useful.
As ever, please email email@example.com if you have any questions.
The Government continues to keep options open for further measures to stem the spread of the virus, following yesterday’s announcement that schools would be shut down for all children bar some important exceptions.
We are awaiting final details on the various finance schemes from the Government and as soon as we have them we will share on this blog. For now, the Treasury has given a few more details around some of the initiatives, which can be found here. And Hambro Perks also have a useful write up of the Coronavirus Business Interruption Loan Scheme.
In the face of a dramatic shift in how we will lead our lives, the reliance on tech for education, health, nutrition and support are becoming ever more important. As a company we too are shifting much of our work online over the coming months and will seek to provide our networks with topical and useful information from our founders.
Update: 18/03/20 – The most high tech response to a pandemic in human history
Covid-19 is fast shaping up to be the challenge that defines us personally and professionally. We will confront this virus with the most high-tech response to a pandemic in human history. The tech industry like many others is facing huge challenges, but it also has a huge part to play in the fight against a once-in-a-century pandemic. Tech has the opportunity to help find rapid solutions to those challenges right in front of us, manage us through some trying times, and contribute to rebuilding an economy on the other side.
Like many organisations, we have specific challenges posed to us. But, just as we coach the businesses that go through our programmes, we are adapting what we do over the coming months to support you.
This will be a regularly updated blog that contains the latest advice from the Government to the sector, including details of the support they are offering to different industries, as well as being a constant source of innovation and inspiration about how tech is supporting the fight against this virus.
And we will pivot to offer advice on how to lead your business through this uncertain time, with regular webinars on a number of mission critical subjects.
As we all seek to isolate or distance ourselves physically from one another, let us digitally connect more closely than ever. We are all clear that there are significant challenges in healthcare, education, sustainability and perhaps even democracy in the months ahead. But across the piece, UK scaleup tech companies will be able to offer radical solutions in extraordinary times. Over the coming months, technological involvement in keeping services going, keeping businesses afloat and keeping people alive will be essential, impactful and exponential.
If you have a story you want us to feature, or need information that we currently don’t include, then please get in touch with us to let us know. Email us as firstname.lastname@example.org.
For the latest updates of government business support for tech companies and community resources, visit our Covid-19 Info Hub.