UK startups have received ample government support already and while COVID-19-related relief might be tempting, the money could be better spent elsewhere
The UK government shouldn't set up a bailout fund for startups. That's their investors' job. — NEWS | COMMUNITIES | 9 Apr
The argument lost, fast. Eleven days after publication the government announced the £250M Future Fund for high-growth companies plus £750M for SMB R&D — and by September 2021 it had deployed £1.14B into 158 startups, including Kano and Dice FM. The piece is now best read as the losing side of the debate that produced the UK's flagship pandemic vehicle.
First-order effects
Had the argument held, VC-backed UK startups would have been pushed onto their existing investors and the general lending schemes the founders' letter called inaccessible; instead the Future Fund gave qualifying companies up to £5M each with the government as co-investor.
Second-order effects
The fund's structure — matching private money rather than replacing it — partially answered the column's core objection, forcing the state to underwrite only deals where private capital also committed, while keeping pace with the French and German packages that had set the political benchmark.
Third-order effects
A one-off crisis instrument has hardened into an expectation of standing state co-investment: by 2023, London investors and founders were pressing the government to back its startup-economy pledges with concrete incentives or risk ceding ground to rival cities.
The trend: COVID-era emergency support is consolidating into permanent government co-investment in European startup ecosystems, with the UK's Future Fund as the case study.
According to @pitchbook there's >£10B of dry powder in UK VC funds right now, more than ever. As @robinklein argues, we can't let taxpayers take on all this risk, at the least the Govt should request matched financing. https://twitter.com/...
Yes. Don't bailout companies (including startups), bailout people. People are the number one expense anyway for startups. We will free people from wage slavery in the process and create a space for new startups that will address the needs of our communities. https://twitter.com/.…
UK has one of the strongest ecosystems in the world for start-ups already, more matched capital or increasing the BBB, with a directive to act faster, would be impactful. £5B of tax-payers money that could end up returning £0 could be a millstone for the sector for years.
1) Not sure tweet caption captures @robinklein @localglobevc's perspective here given he says: “I'm not advocating doing nothing ... we should urgently make the established mechanisms and tools more efficient and responsive.” https://twitter.com/...
2) I agree w/ many points eg need to speed-up R&D tax credits & @BPatientCap @innovateuk decisions [FYI InnovateUK is doing exactly that for #Covid19 grant below and has revised its due diligence to have a 10-day decision] https://apply-for-innovation- funding.service.gov.uk/...
Op-ed in @Siftedeu by @robinklein: “Venture capital funds in the UK have more than enough capital... Ensure that only the startups and scaleups that continue to have the backing of existing investors benefit from the state's support.” https://sifted.eu/...
This, by vc @robinklein, resonated with me. Focus gov bailout on proven companies that need help over the bump. Let risk capital take risks with unproven startups. https://sifted.eu/...
Don't bail out the startups, says Robin Klein. “Please use scarce taxpayers money in the sectors that really need it — hospitality, transport, recreation, arts and charities. Offering startups debt packages or handouts is not the way to go.” @Siftedeu https://sifted.eu/...
As a multiple startup owner/founder/investor I agree with this... @robinklein Don't bail out the startups (failure is an intrinsic part of innovating), but do consider co-investment in the scale-ups. https://sifted.eu/...
To be clear, I have no problem with Govt boosting the economy through co-investment in the scaleup sector (in fact this would be good for the UK and produce returns for the Treasury!) - what I can't see the logic of is further support for startups - most of whom are going to fail…