The government has become a shareholder in a toilet maker, a broadband provider and a company that helps make reusable cups as part of the Treasury’s foray into the venture capital market through the one of its coronavirus support programs.

Over the weekend, the government shut down business applications for the Future Fund, the state program devised by Chancellor Rishi Sunak that provided convertible loans totaling over £ 1 billion to over 1,000 British start-ups.

These loans are automatically transformed into minority stakes for the Future Fund in companies during their next rounds of table, unless the investors ask to be repaid.

According to documents from Companies House, the Future Fund is now a shareholder in at least two start-ups that have already converted loans into equity investments: Propelair, a next-generation toilet manufacturer, and Bockatech, a packaging company. reusable.

A third company, Cornish broadband service provider Wildanet, has also seen a £ 200,000 loan from the Future Fund convert into a government stake after a recent fundraiser.

“We thought Rishi Sunak could show up for a board meeting,” said Ian Calvert, Managing Director of Wildanet. “The Future Fund has been a very useful tool because it has allowed us to stay the course. “

Further government stakes in startups secured through the Future Fund are expected to be disclosed in the coming weeks as the companies release their results, according to people familiar with the situation.

Many start-ups invest heavily up front in order to grow quickly, pushing companies into a loss, which has made them ineligible for other government Covid-19 loan programs for businesses.

Mr. Sunak launched the Future Fund in May last year to fill this gap and help some of the UK’s most promising companies, claiming that ‘start-ups that have strived to be the best’ would benefit.

The Treasury said the operation of the Future Fund was the responsibility of the state-owned British Business Bank, and Mr Sunak had no say in which companies might end up being partly government-owned.

Venture capital financing is risky, many businesses fail before they reach a stage of profitability, although some holdings managed by the British Business Bank can prove to be very lucrative for the government if sold at a profit over the initial investments.

Venture capitalists said the market had drawn a wave of liquidity in recent months as investors chased companies with growth prospects, pushing valuations higher.

The British Business Bank said it would “continue to work with the government to develop a long-term strategy to effectively manage the equity portfolio”.

The Future Fund was the only state-backed loan program that was not extended last year by Mr. Sunak until spring.

Under the Future Fund, the government provided loans of between £ 125,000 and £ 5million to businesses, which were to be supplemented by private investors.

The program garnered media attention for lending to a wide range of businesses, including the “sex tech” company Killing Kittens.

Phoenix Product Development Limited, which operates as Propelair, has developed a toilet that saves water and improves hygiene by using a high-speed jet of air to leave the pan cleaner compared to other products. .

David Hollander, Managing Director of Basildon-based Propelair, said: “The loan from the Future Fund, which we converted following a very successful increase last August, has been a lifeline. It is very unlikely that we would have had time to raise new funds without the Future Fund. “

Bockatech, based in Huntingdon, Cambridgeshire, has developed reusable plastic moldings for packaging used in a variety of industries including food, retail and healthcare.

Chris Bocking, co-founder of Bockatech, said: “When we started five years ago, it was unthinkable that the UK government had any stake in green growth technology.

“The combination of climate change and Covid-19 are unprecedented circumstances, and it’s great to see the government ready to act. “

Beauhurst, a data provider for high growth companies, estimates that 25 companies have so far converted Future Fund debt to equity based on an analysis of fundraising.

Seedrs and Crowdcube, crowdfunding platforms, were among the top 20 funders when the government provided loans to businesses through the Future Fund, according to Beauhurst.

Companies providing crowdfunding are often less scrutinized than investments by traditional venture capitalists, he said.

Additional reporting by George Parker in London


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