General
What is Future Fund: Breakthrough (FF:B)?
FF:B is a £425m UK-wide programme which encourages private investors to co-invest in high-growth, innovative companies. Through the Future Fund: Breakthrough programme, British Patient Capital will make equity co-investments with private sector investors in later stage Research & Development (R&D) -intensive UK companies operating in breakthrough technology sectors, such as quantum computing, cleantech, and life sciences. British Patient Capital will construct a portfolio of growth-stage breakthrough technology companies over time.
The fund will not invest in companies looking to develop or employ products with a short time-to-market, recognising that a strong private sector market for investment in these sectors already exists.
The types of companies FF:B is targeting will help accelerate the deployment of breakthrough technologies which have the potential to transform major industries, develop new medicines, support the transition to a net zero economy and strengthen the UK’s position as a science superpower. Due to high research and development costs, breakthrough technology companies typically require more capital than other companies to fuel the later stages of their growth.
FF:B will only invest in funding rounds of at least £20m in size, including FF:B capital. The maximum FF:B share is 30%, meaning that the minimum amount of private sector funding in a potentially eligible round needs to be £14m. FF:B will invest on the same terms as the sponsor investor.
How will the fund be administered?
FF:B will be delivered via British Patient Capital, a commercial subsidiary of the British Business Bank.
Who can apply for the FF:B?
Applications to FF:B can only be made by a sponsor investor.
How do companies and investors register an interest in the fund?
Sponsor investors can apply to FF:B on the For investors page of this website.
Companies cannot apply directly for FF:B funding. Applications can only be made by investors. Companies can however register for general British Business Bank updates and news on the British Business Bank website.
Budget
Is the £425m new funding or has it been reallocated from existing British Patient Capital budgets?
None of this funding has been diverted from other Bank schemes. The original Future Fund: Breakthrough was £375m. In the Autumn Statement in 2023, the Chancellor announced that Future Fund: Breakthrough was extended with at least an additional £50m to invest in high-growth, innovative firms.
Company Eligibility Criteria
What type of companies is FF:B targeting?
FF:B targets innovative, R&D-intensive UK companies operating in breakthrough technology sectors, such as quantum computing, cleantech, and life sciences, that have longer lead times to product commercialisation. The fund is focused on areas of the market where there is the greatest need for intervention, to increase the investment round size. Full company level eligibility criteria are listed below.
What are the company eligibility criteria for FF:B?
To be eligible for the scheme, a company must meet all of the following eligibility criteria:
- The company receiving investment should be UK based (UK incorporated) with significant UK operations (meaning at least half of the company’s overall employment base and half of its research employees are based in the UK).
- The company must be carrying out R&D activity in the UK by meeting all three of the following criteria:
- R&D spending (as defined by pre-set accounting rules) must have been at least 10% of total operational cost base on average over the last three years or at least 15% in one of the past three years.
- The company is developing defensible intellectual property in the UK which they expect to be the company’s main revenue source.
- The company intends that 20% or more of its employees will be carrying out research for at least three years from the date of investment, in roles that require a relevant master’s degree or higher.
- The company must have raised at least £5m of equity investment from third-party investors in previous funding rounds in the last five years prior to Future Fund: Breakthrough investment.
- The company must be raising a minimum investment round size of £20m
What is the total operational cost base?
The total operational cost base includes both fixed and variable operating costs, i.e. those costs associated with the day to day running of the core business.
What is defensible intellectual property?
We are likely to regard IP as ‘defensible’ where the company is the proprietor of or is the applicant for a patent on an invention and/or where the product or process in question is confidential to the company and is protected as a trade secret and/or is protected by other intellectual property rights belonging to the company.
What happens if the company stops meeting the company eligibility criteria post-investment by FF:B?
If subsequent to FF:B’s investment the company develops in such a way that it significantly moves away from the company eligibility criteria, British Patient Capital will have the option to sell its investment and will expect the company to help facilitate that sale.
Will companies in Scotland, Northern Ireland and Wales be able to access the fund?
Yes, FF:B is open to eligible companies across the whole of the UK.
What are the investor criteria for FF:B?
Companies looking to raise capital via FF:B must have a sponsor investor. The sponsor investor needs to meet the criteria outlined in Question 16 and be an investor in the proposed funding round. The sponsor investor can be a new or existing investor in the company.
Does the sponsor investor need to be the largest investor in the syndicate?
No, the sponsor investor does not need to be the largest investor in the syndicate. The sponsor investor needs to meet the investor criteria outlined in Question 16 and can be a new or existing investor in the company.
What are the criteria for a sponsor investor?
Companies raising an investment round with the support of FF:B will require a sponsor investor to meet one of the four criteria below. The sponsor investor can be:
- Any fund managed or advised by an FCA (or equivalent) authorised firm with private sector investment making up greater than 50% of the total fund size and who is currently managing an active fund greater than £100m. The fund must have raised capital from at least three independent Limited Partners (or equivalent) and have a written investment strategy that aligns with the investment strategy of FF:B;
- Any fund or investment vehicle with an appropriate investment strategy, managed or advised by a fund manager which has applied to and obtained an investment from a member of the British Business Bank group. For example, those supported by British Patient Capital and by the British Business Bank’s Enterprise Capital Funds programme.
- Investment vehicles such as corporate venture capital funds which have a carry or Long Term Investment Plan (LTIP) structure in place.
- Other investment vehicles with a minimum of £100m of investment capital, a broad range of independent investors (at least three), a demonstrable track record and an appropriate investment strategy where these have been approved by FF:B
The sponsor investor will be required to share an investment paper with BPC setting out the rationale for making the investment. The paper should include information about valuation, the business plan and follow-on funding expectations. The sponsor investor will also be subject to reputation and customer due diligence (CDD) checks and will be required to share with British Patient Capital any legal and financial due diligence reports prepared on the company.
The sponsor investor will also be expected to contribute a significant amount to the investment round. This will be assessed by British Patient Capital, by taking into consideration the financial position of the fund and the level of previous investment in the company.
Will tax advantaged investors such as EIS/VCTs be eligible to invest in a FF:B funding round?
Yes, tax advantaged investors such as EIS/VCTs will be able to invest as part of a syndicate. However, they will not be able to be a sponsor investor for FF:B purposes.
Will corporate venture capital investors be able to participate in a FF:B funding round?
Yes, corporate VCs will be able to invest as part of a syndicate. They will also be able to be a sponsor investor for FF:B purposes if they meet one of the criteria set out in Question 16.
Will other investors such as sovereign wealth funds, family offices and investment trusts that do not meet the criteria for a sponsor investor be able to participate in a FF:B funding round?
Yes, other investors will be able to invest as part of a syndicate. However, for the purposes of FF:B, they can only be a sponsor investor if they meet one of the criteria set out in Question 16.
Is there a limit to the number of investors who can be involved in a FF:B funding round?
There is no limit to the number of investors who can invest in a FF:B funding round, providing the sponsor investor requirements referenced in Question 16 are satisfied.
Can investors that are headquartered outside of the UK sponsor a FF:B funding round?
Yes, providing they meet one of the three criteria referenced in Question 16, overseas investors can lead FF:B funding rounds.
Relationship with Future Fund
Will FF:B operate in a similar way to the Future Fund?
No. Future Fund was set up to support innovative firms suffering due to the Covid-19 pandemic, by offering Convertible Loan Notes. FF:B is not a Covid-19 mitigation measure but is a direct co-investment fund aimed at growth stage innovative, R&D-intensive UK companies seeking larger investments than the Future Fund offered.
Does FF:B replace the Future Fund?
No. These are entirely separate and different programmes. Future Fund addressed the immediate funding challenges that innovative, equity backed, UK companies faced due to Covid-19. Whereas Future Fund: Breakthrough focuses on R&D intensive companies and will leverage the existing co-investment capabilities of British Patient Capital, constructing a portfolio of growth-stage breakthrough technology companies over time.
Will there be follow on funding for the original Future Fund?
This scheme is not aimed at the original Future Fund cohort. However, these companies may receive funding from FF:B, or other government schemes, should they meet the required eligibility criteria.
Will FF:B only invest in, or prioritise, companies that have received Future Fund investment?
No. FF:B is an entirely separate programme targeting R&D intensive scale up companies. It will not prioritise existing Future Fund investee companies.
Investment
What will a typical investment be?
An equity investment, with FF:B investing on commercial and no less favourable terms than the sponsor investor. FF:B will invest up to 30% of a funding round.
What is the investment process?
It is our expectation that sponsor investors (meeting the criteria set out above in question 16) will lead the transactions and will be British Patient Capital’s main initial contact point. Sponsor investors with companies/proposals which meet the company eligibility criteria will be contacted by the investment team. Only proposals/companies introduced by an eligible sponsor investor will be considered.
An overview of the investment process is outlined below:
a. Assessment of sponsor investor eligibility. Once an investor has completed the on-line application form and been assessed as potentially eligible, a member of the British Patient Capital team will get in touch with the sponsor investor to verify their eligibility as a sponsor investor for FF:B purposes and to discuss any proposed investee company.
b. Introduction of British Patient Capital to the potential investee company by the sponsor investor. Once the sponsor investor has been confirmed as eligible, the British Patient Capital investment team will ask the sponsor investor for an introduction to the investee company.
c. Assessment of investee company and transaction eligibility. The British Patient Capital investment team will review whether the potential investee company and transaction meet the programme’s criteria.
d. Due diligence on investment opportunity. The British Patient Capital investment team will undertake analysis of the potential investee company and its technology. When British Patient Capital has completed its due diligence, it will then take the opportunity to British Patient Capital’s investment committee.
e. Final Decision by Investment Committee. British Patient Capital’s investment committee will then decide whether to invest in the company.
What is the FF:B investment decision making process?
FF:B will be delivered via British Patient Capital, a commercial subsidiary of the British Business Bank. Therefore, investment decisions will be made by the British Patient Capital Investment Committee. The Investment Committee will consider the extent to which investment proposals meet the FF:B programme’s policy and commercial objectives.
Any FF:B investment should not result in HMG owning more than 49% of any company (including when combining shareholdings from other investment programmes).
Will follow-on funding be available?
Some of the FF:B allocation is reserved for follow-on investment. In considering a follow-on investment, British Patient Capital will initially look to the sponsor investor to make a proposal but will make its own commercial investment decision.
Can sponsor investors and other investors invest in more than one FF:B Deal?
Yes, as long at both parties meet the investment criteria above and the company is eligible for FF:B investment.
What is the timeframe for individual Investments?
The timeframe will be determined by the nature of the transaction and speed of the sponsor investor.
Are there restrictions on the use of proceeds of the investment?
There are no pre-determined FF:B specific restrictions on the use of proceeds although we would expect these to form part of the agreement between the company and the investors.
Regionality & Diversity
How will FF:B ensure that companies from across the UK can benefit?
FF:B will be open to companies in all regions and nations of the UK.
The British Business Bank has regional finance products that aim to address regional imbalances in access to finance across the UK. For instance, the Northern Powerhouse Investment Fund, Midlands Engine Investment Fund and Cornwall and Isles of Scilly Investment Fund have invested over £339m between them into businesses in the North, Midlands, and Cornwall & the Isles of Scilly. Further information on these programmes can be accessed via the British Business Bank website.
The Bank has also invested over £23m alongside business angels through the Regional Angels Programme
The British Business Bank’s Finance Hub also provides information on funding available within each region and nation of the UK.