The British Private Equity & Venture Capital Association (BVCA) has recommended the UK Government introduces a GBP500 million funding facility for VC-backed, early stage companies operating in the digital, biotech and life sciences sectors during the Covid-19 crisis.
Early stage businesses have been a key driver in establishing the UK as a global leader in the digital economy and other high tech sectors, and this position is now under threat, according to the BVCA.
The specialist sources of capital they usually access are increasingly unavailable, and they also do not meet the criteria of regular commercial lenders. This puts at risk their intellectual property and patents, with the prospect of strategically important UK know-how being lost to international competitors, said the British business organisation.
The BVCA is proposing a bridge funding facility in the form of a convertible loan, a standard investment instrument, of up to GBP5 million per company, with Government funding supplemented by existing investors.
Including money from the private sector, this would provide at least GBP625 million of capital to early stage businesses. The BVCA argues that it should be channeled rapidly into the market by the British Business Bank.
“The scheme seeks to address a serious market failure in the UK’s globally-competitive digital and tech economy caused by the urgent and necessary steps taken to address the Covid-19 outbreak,” said Michael Moore, director general, BVCA.
“It is designed to support the sector at an unprecedented time, balanced with the need to protect taxpayers’ interests. The private sector must and will contribute but cannot solve this problem without help from the UK government,” he added.
The BVCA’s submission to the government follows consultation with its members, and analysis of the issues facing these companies and engagement with officials.
BVCA added that without a solution to the issue, the Covid-19 crisis will starve early stage companies of the cash they require to turn into self-sustaining businesses and will lead to promising companies failing.
