The British Business Bank (BBB) has released an assessment, conducted by Ipsos UK, highlighting the significant impact of the Future Fund: Breakthrough (FF:B) programme in bridging the equity funding gap faced by highly innovative R&D-intensive companies.
The assessment reveals that FF:B is effectively tackling the late-stage equity funding gap by amplifying round sizes and attracting third-party capital. Notably, deep tech and life sciences firms are leveraging FF:B to bolster employment, intensify investment in R&D activities, and expedite product commercialisation.
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However, structural and market challenges persist, including FF:B’s inability to lead deals and the UK venture capital market’s lag behind its US counterpart.
Launched in 2021 with a budget of £375 million, FF:B targets UK-based, R&D-intensive companies with cutting-edge technologies, aiming to encourage private investors to co-invest in high-growth ventures. Following its success, an additional £50 million has been allocated to FF:B in the Government’s latest Autumn Statement.
Louis Taylor, CEO of the British Business Bank, underscored the programme’s pivotal role in fostering long-term, patient finance accessibility for R&D-intensive enterprises, facilitating their scalability and commercial potential.
The assessment indicates a clear justification for FF:B’s role in addressing the funding gap, with the UK still trailing the US in R&D-intensive funding despite increased investments in recent years. While the programme’s design aligns with its objectives, challenges such as the inability to lead deals and market preference for smaller round sizes have been identified.
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By GlobalDataResponding to feedback, FF:B has reduced its minimum round size from £30 million to £20 million, aiming to broaden its impact on innovative companies. By August 2023, FF:B had invested £111.4 million in 16 companies, alongside £724 million from third-party investors, exceeding its leverage target.
Moreover, FF:B’s influence extends across various R&D sectors, with a notable presence in deep tech and life sciences. British Patient Capital, a key player in the funding ecosystem, is widely regarded for its positive influence on firms and investors.
However, stakeholders highlighted procedural delays in decision-making processes, prompting adjustments to streamline investment procedures.
Looking ahead, stakeholders emphasise the need for a substantially larger budget to make a lasting impact on the UK’s deep tech and life science sectors, especially considering the US’s comparative advantage in R&D-intensive investments.
Despite progress, the assessment underscores the importance of continued efforts to bolster funding accessibility for innovative enterprises, ensuring the UK remains competitive in the global innovation landscape.
The British Business Bank is the UK government’s economic development bank.
