Seven tech industry bodies are calling on the government to provide £300m to keep start-ups going during the coronavirus crisis.
A generation of them will be “wiped out” if they are not helped quickly during the COVID-19 pandemic, the Chancellor, Rishi Sunak has been warned.
This includes several medical start-ups which could directly, or indirectly, ease the burden on the NHS as it struggles to cope with the outbreak.
In a letter seen by Sky News, seven of the UK’s leading tech industry lobby groups warn the Treasury that a £300m funding package is necessary to protect “the future of British innovation”.
Mr Sunak created the Coronavirus Business Interruption Loan Scheme (CBILS) in early March to provide loans of up to £5m to smaller businesses across the UK.
But the industry bodies say loss-making companies – a category which includes almost all early stage and fast-growing start-ups – do not qualify for these facilities, a fact it claims to have confirmed with lenders on the CBILS scheme.
Dom Hallas, executive director of The Coalition for a Digital Economy (Coadec), which represents smaller start-ups, has told Sky News that he believes as many as 1,300 firms were at risk, because they were unable to raise new funding from venture capitalists.
“It’s a huge problem right now, no one will do new deals,” he said.
“An entire cohort of start-ups will be wiped out.”
One company at risk is Juno, which was in the process of raising seed funding for the technology it has developed to “decode” vaginal microbiomes, when the virus crisis struck.
“We find ourselves in a really tricky environment, trying to navigate the seed stage during a pandemic,” the company’s co-founder Hana Janebdar told Sky News.
He added: “It would be such a shame if start-ups actively trying to close the gender health gap, making an innovation that’s much needed for women’s health, didn’t come to fruition.”
Another medical start-up, which did not want to reveal its name for fear of upsetting venture capitalists, confirmed to Sky News that its funding had been pulled, even though demand for its telemedicine service was higher than ever.
The industry groups, which include Tech Nation, a start-up-supporting body which receives £7.1m in government funding, are calling for a new “Runway Fund” to be created by the Treasury.
The plan would include investing £300m through the British Business Bank, which would give the bank equity in start-ups, meaning the government could potentially make a profit from this bailout.
Alongside Coadec, the industry bodies that have signed the open letter are: Innovate Finance; Tech Nation; UK Tech Cluster Group Chair; InsurTech UK; Tech London Advocates; and Global Tech Advocates.
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A spokesperson for HM Treasury told Sky News: “The Chancellor has been clear that we all must play our part in the national effort to support businesses and protect jobs.
“That is why we’re taking unprecedented action and have announced £330bn in business loans and guarantees, paying 80% of the wages of furloughed workers for three months, VAT and tax deferrals, introducing cash grants of up to £25,000 for small companies and covering the cost of statutory sick pay.
“We’re working with the financial services sector to ensure that companies feel the full benefits from this support.”