Uk tech start-ups are pressing the government for a bundle of emergency support to help them weather the coronavirus pandemic.
The UK, which has been effectively lockdown since March 23, unveiled a relief package earlier this month for businesses hit hard by the virus outbreak.
Under recently-appointed minister of finance Rishi Sunak, the govt has launched a £330 billion ($409 billion) loan scheme and other relief measures to assist firms avoid collapsing.
But many start-ups within the country say they can't access such funding. That’s because they need to prove they might be “viable” businesses if not for the disruption caused by COVID-19, potentially blocking out ventures that focus more on growth than profits.
The loan program isn't relevant to tons of start-ups within the ecosystem,” Russ Shaw, founding father of Tech London Advocates, an industry campaigning group, told CNBC last week. “Many if not all are loss-making, in order that they wouldn't qualify for that support.
Meanwhile, some lenders have come under attack for requiring personal guarantees to issue the emergency loans. Agreeing such terms would mean banks could follow individual company directors’ assets if their business goes under.
Ry Morgan, co-founder and chief product officer of London-based start-up Unmind, said a number of his fellow entrepreneurs are faced with “bureaucratic red tape” when approaching the banks.
They’re still in many instances posing for personal guarantees, which isn't something i feel the overwhelming majority of parents can plan to ,” he told CNBC last week.
For their part, Britain’s “Big Four” banks — Barclays, RBS, Lloyds and HSBC — have since said they won’t take personal guarantees as security for coronavirus-related loans of up to £250,000.
The U.K. government said it's in regular contact with the tech industry. “We’re committed to supporting our tech sector in these challenging times,” a spokesperson for the Department for Digital, Culture, Media and Sport, told CNBC by email.
The spokesperson added:
This includes a loan scheme supporting SMEs with no upfront costs and employment retention scheme to enable employers to continue paying a part of their employees’ salary with HMRC reimbursement. additionally , many self-employed individuals will receive direct cash grants during this crisis.
What could the united kingdom do?
France recently introduced a 4 billion euro ($4.4 billion) liquidity package to support its start-ups’ cash flows. Some worry the U.K. might be in danger of falling behind.
Figures in London’s tech community are pushing for a replacement “runway fund” managed by U.K. state-owned lender, British Business Bank, to offer start-ups enough time to survive. the thought would be to issue convertible notes that convert into equity once a firm next raises capital.
The proposals come as risk capital , or VC, funds come struggling to be more sparse with their investments, faced with the prospect of an impending economic downturn. Britain leads Europe when it involves venture dealmaking, pulling during a record $13.2 billion last year.
Unmind’s Morgan said he was more fortunate than others to boost money before the U.K. coronavirus lockdown. The London-based workplace psychological state platform recently closed a $10 million funding round
I think more might be finished businesses who are therein tech-centric venture space
We are very fortunate with our own value proposition and therefore the coincidental timing of our round. But within the future I’d wish to see more being done.
Others aren’t as lucky. Profusion, a knowledge analytics and marketing firm, had been looking to boost funds to expand its business and make a diversity-focused data science academy. But it had been forced to pause fundraising efforts thanks to the health crisis.
VCs are definitely becoming cautious,” Natalie Cramp, CEO of Profusion, told CNBC. “You saw that back in 2008 and we’ll see it again now.”
In some respects perhaps that’s good,” Cramp said, highlighting SoftBank’s bailout of office rental giant WeWork.
But it does make it difficult when there’s such a lot potential within the stuff that you simply do for the longer term and you would like to accelerate it.
The messaging beginning from the community by and enormous may be a lot of individuals are in survival mode at the instant , Tech London Advocates’ Shaw said.
They don’t skills long this is often getting to last.
Shadrach is a Trending Journalist. His first job was as a newsreader and journalist at an award winning magazine. He spends most of his time scouring the internet for the hottest topics to share with his readers.