The government’s flagship support scheme for startups hit by coronavirus, the Future Fund, has been described as “simply not good enough” and “a bad deal” by one of the UK’s leading tech entrepreneurs.
Priya Lakhani, founder and CEO of education technology company Century, said the terms under which money could be accessed through the scheme are so bad that “our lawyers would tell us not to accept.”
Lakhani, who received an OBE in 2014 for services to business, said that though “teams in government are working really hard on this, what they’ve come up with is simply not good enough”.
The government’s £500m Future Fund will issue convertible loans from £125,000 to £5m to businesses facing financing difficulties as a result of the pandemic.
The loans will have to be matched by private investors and may convert to equity at a discount of at least 20 per cent when firms kick-off their next funding round.
That means the government could end up owning a sizeable chunk of startup and scale-up businesses.
Appearing on The City View podcast, Lakhani said “the terms of the deal are incredibly aggressive from an investor’s perspective… they are just not the terms of a deal that any of us would want to accept.”
She said the structure of the scheme “doesn’t sound fair to me at all” and urged the government to go back to the drawing board.
“It’s lacking so much,” she said, adding: “I would be very happy to mark up the term sheet of the Future Fund and send it back with what we think is fair.”
Announcing the Future Fund on 20 April, chancellor Rishi Sunak said “This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”
But Lakhani, who served as a business adviser to the coalition government, said the Future Fund “is not a deal that 95 per cent of startups or scale-ups can take advantage of”.