Funding competition Future Economy Investor Partnerships: Investor Selection 2022

Investors can apply to partner with Innovate UK to invest in innovative SMEs aligned with grant funding

This competition is now closed.

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Competition sections

Description

Innovate UK is inviting investors to partner with us. Together we will support growth in UK micro, small and medium-sized enterprises (SMEs) by aligning Innovate UK’s grant funding for R&D projects alongside your investment.

There is no Innovate UK funding awarded to applicant investors. Grant funding will be awarded to applicant companies (SMEs) to cover a proportion of eligible project costs alongside your aligned investment. The investment will typically be in the form of equity but may include other forms of funding, like convertible loans.

We aim to create a broad “pool” of investor partners to invest in SMEs innovating across the future economy investor partnership programme and at all stages of business growth. The investor partnership programme will cover the breadth of the future economy, as described in Innovate UK’s plan for action, in particular net zero, health and wellbeing, next generation digital technologies and the technology families.

You will be asked to indicate the scope of your investment strategy for the next 3 years.

This application closes at 11:00 am UK time on the deadline stated.

Funding type

Investor Partnerships

Project size

This competition is not offering any funding.

Who can apply

We are seeking investor partners who want to invest in high growth potential micro, small and medium-sized enterprises (SMEs).

Your organisation must be an investor or be able to demonstrate that you can directly facilitate investment.

To be selected you must demonstrate that you:

  • are a credible investor, or can facilitate investment, with a clear investment strategy aligned to the Innovate UK plan for action for the future economy and have the ability to generate returns and add value to your portfolio businesses beyond financial support
  • have the capacity to invest in companies that are successful in their application to the investor partnerships programme
  • either have the capacity to follow your investment or to encourage other investors to fund further rounds of investment as and when required
  • have the capability to successfully transact investments and manage your portfolio
  • are in a position to lead the investment

How investors are selected

The process for becoming an investor partner is selective. Applications will be assessed and subject to due diligence checks by Innovate UK, before being considered by Innovate UK’s Investor Selection Panel.

By submitting an application, you agree to be bound by the terms and conditions which set out the roles, responsibilities and obligations of investor partners and Innovate UK.

Future SME selection competitions

SMEs will be able to apply for grant funding for a proportion of their eligible project costs, aligned with your investment into the business, through a series of competition rounds over the next 3 years.

The process for identifying and assessing SMEs is described in the competition brief for each round of the future economy investor partnership programme. In all cases it will require the SME to apply through our Investment Funding Service to a specific competition.

The SME’s application will be independently assessed to identify the highest quality project proposals that fall within the scope of the future economy investor partnership programme. We will inform you and the applicant whether we can offer grant funding to the business.

The grant funding will be subject to completion of our project setup process that includes checking the viability of the project and the eligibility of the costs to be covered. It is also subject to completion of your investment.

Subsidy control (and State aid where applicable)

This competition does not provide funding to the applicant investor.

Future SME competitions will provide funding in line with the UK's obligations and commitments to Subsidy Control. Further information about the UK Subsidy Control requirements can be found within the EU-UK Trade and Cooperation agreement and the subsequent guidance from the department of Business, Energy and Industrial Strategy (BEIS).

Innovate UK is unable to award funding to organisations that are considered to be in financial difficulty. We will conduct financial viability and eligibility tests to confirm this is not the case following the SME application stage.

EU State aid rules now only apply in limited circumstances. SMEs seeking funding from Innovate UK aligned with investment from you should see our general guidance to check if these rules apply to them.


Further Information

If an SME is unsure about their obligations under the UK Subsidy Control regime or the State aid rules, they should take independent legal advice. We are unable to advise on individual eligibility or legal obligations.

SMEs must make sure at all times that the funding awarded to their organisation is compliant with all current Subsidy Control legislation applicable in the United Kingdom.


This aims to regulate any advantage granted by a public sector body which threatens to or actually distorts competition in the United Kingdom or any other country or countries.

If there are any changes to the above requirements that mean we need to change the terms of the SME competitions, we will tell you as soon as possible.

Funding

Innovate UK has allocated up to £80 million to fund innovation projects, aligned with investment from investor partners, through regular rounds of the SME competition between July 2022 and July 2024. This competition does not provide funding to the applicant investor.

Potential SME applicants will be able to apply for grant funding for feasibility study, industrial research and experimental development projects:

  • feasibility studies can have eligible project costs from £50k to £300k, can last between 6 and 12 months and will have grants of up to 70%, with at least the same amount of aligned investment from or led by an investor partner
  • industrial research projects can have eligible project costs from £100k to £1m, can last between 6 and 18 months and will have grants of up to 70%, with at least the same amount of aligned investment from or led by an investor partner
  • experimental development projects can have eligible project costs from £250k to £2m, can last between 12 and 24 months and will have grants of up to 45% for micro and small businesses or up to 35% for medium sized businesses, with at least twice the amount of aligned investment from or led by an investor partner

SME Projects

Investor partnerships are aimed at supporting SMEs that seek support for R&D projects through Innovate UK grant funding and that also seek aligned investment from investor partners.

To be an investor partner, you must demonstrate credibility, capability, capacity, commitment and alignment of interest to the scope of the investor partnerships future economy programme.

SME projects must lead to new products, processes or services that are significantly ahead of others currently available or propose an innovative use of existing products, processes or services. It can also involve a new or innovative business model.

We are looking to support projects that focus on the future economy areas included in the Innovate UK plan for action. SME projects must focus on one or more of the following themes:

  • Net zero
  • Health and wellbeing
  • Next generation digital technologies
  • Technology families

During the investor partnership programme, we will identify further areas of specific scope focus. These are likely to include:

Net Zero

  • green finance
  • critical circular materials
  • resource efficiency for materials and manufacturing

Health and Wellbeing

  • innovative solutions to health and healthcare challenges (Biomedical Catalyst)
  • improved delivery of mental health and wellbeing services, through the application of immersive technologies
  • novel low emission production systems, including vertical farming and alternative proteins

Next generation digital technologies

  • innovation in the creative industries (Creative Catalyst)
  • adoption of artificial intelligence and machine learning technologies in targeted industries

Equality, diversity and inclusion

  • diverse founders of innovative businesses
  • innovative products or services that support diverse groups
  • diverse investors

We are particularly interested in receiving SME project applications from diverse businesses; those involving communities that are typically under-represented, including from regions that have historically accessed lower levels of investment (outside London, Oxford and Cambridge) or with, for example, female, ethnic minority and diverse-ability founders.

Investor partner applications from investors whose investment strategies include diversity as an area of focus are also encouraged.

4 October 2022
Competition opens
19 October 2022
Online briefing event: watch the recording
8 November 2022 12:00pm
Competition closes
26 January 2023 12:01pm
Applicants notified

Before you start

We are inviting applications from investor partners who have not participated in Innovate UK investor partnership programmes before. Investors who have participated in previous investor partnership programmes will be directly invited to apply through a separate process.

You must complete the full application form.

We will use the information that you provide, together with external assessment, to enable an investor selection panel to decide if you are suitable to be an investor partner in the future economy investor partnership programme. We will use assessors who have a good understanding of investment organisations.

Where we are working with more specialist funds or charities, we will make every effort to use assessors with relevant experience. The scores and comments provided by the assessors help inform the process by which we confirm you as an investor partner for the future economy investor partnerships programme.

The assessors will score your answers to questions 2 to 5. You will receive feedback for each scored question. Your answer to question 1 will be reviewed by our investments team to confirm your financial standing.

If you are an applicant investor that has received funding from a public body, for example through one of the British Business Bank’s investment programmes, we will take this into account in confirming your financial standing.

What we ask you

The application is split into 2 sections:

1. Investor details.

2. Application questions.

1. Investor details

This section provides background for our selection process and is not scored.

Application team

Invite people from your organisation to help complete the application.

Application details

The lead applicant must complete this section.

Equality, diversity and inclusion

All participants must complete an equality diversity and inclusion survey to submit your application. The survey will ask you questions on your gender, age, ethnicity, disability status and details about your business. You will always have the option to ‘prefer not to say’ if you do not feel comfortable sharing any information.

We collect and report on equality, diversity and inclusion (EDI) data to address under-representation in business innovation and ensure equality, diversity and inclusion across all our activities.

Investor summary

Describe your organisation, how you invest, your regulatory status, your investment approach, the types of businesses you invest in and the size of your typical investments. Tell us the current and expected level of your investment in businesses that are within net zero, health and wellbeing and next generation digital technologies and technology families described in the Innovate UK Plan for Action. Provide an outline of your management team and key individuals that will be involved in this programme, their experience and the diversity of the investment decision makers in your organisation.

Your answer can be up to 500 words long.


Public description

Provide a description that we can use to promote you as an investor partner and enable SMEs to contact you. SMEs will be encouraged to identify and contact suitable investors from the pool during their application process.

You must include:

  • a dedicated email address or other information on how you wish to be contacted
  • your website
  • your investment criteria and a brief description of the types of companies you typically invest in
  • the value you can add to investee SMEs

Your answer can be up to 400 words long.

2. Application questions

Text Update 21 October 2022: Added further guidance to question 4.

Question 1. Your financial standing (not scored)

Describe:

  • the financial position of relevant entities involved in your investment activities, including providing financial statements for the past 3 years
  • the assets under management of relevant entities involved in your investment activities for the past 3 years, including at the time of submission of your application
  • where 3 years of historic financial statements or assets under management are not available, provide the most recent available information (including management accounts where appropriate)
  • the regulatory status or authorisations of relevant entities involved in your investment activities
  • any investment by public sector entities in your assets under management, for example, investment by the British Business Bank through its Enterprise Capital Funds or Regional programmes or by British Business Investments through its Regional Angels Programme
  • the financial instruments you plan to use in this programme

Your answer can be up to 400 words.

You must upload a copy of your financial statements and your assets under management, or equivalent funds available for investment, to support your answer. These can be in up to 3 PDF documents. Each document can be up to 20 A4 pages long and no larger than 10MB in size. The font must be legible at 100% zoom.

Question 2. Your credibility as an investor (scored)

This question seeks to understand your credibility as an investor. This relates to your credibility in the market and your credibility to the SMEs seeking investment via the programme.

Describe your investment strategy (specifying sectors, regions and any investment constraints), including your preference of investments and investment focus and how you generate returns.

Explain how you source investment opportunities.

Describe your investment strategy, including:

  • your typical investment size
  • your target returns
  • your approach to syndication with other investors
  • how you grow the businesses in your portfolio and increase their value or impact on society
  • your approach and track record in achieving successful exits for organisations you have invested in
  • your failure rates and write-off levels within your portfolio

Explain how you add value to your portfolio investments beyond financial support and the expertise you can bring to actively build value in businesses with high growth potential.

Describe how you encourage diversity within your management team and portfolio companies (for example in terms of age, gender or ethnicity) among companies seeking investment from you. Give examples of how you and your portfolio investments have historically delivered:

  • export growth and international expansion
  • high value job creation
  • turnover growth
  • supply chain enhancement (for example where the supply chain of portfolio investments has had a positive impact on the UK economy)
  • indicators relating to social, environmental or economic impact

Your answer can be up to 800 words.

You can submit up to 3 appendices to support your answer. They must be PDFs and can be up to 20 A4 pages long and no larger than 10MB in size. The font must be legible at 100% zoom.

Question 3. Your capacity for investment (scored)

This question seeks to understand your capacity for investment, both generally and specifically in relation to this programme.

Describe the size, investment period, percentage deployed to date and follow-on expectations of your capital available for investment.

Tell us the amount of capital you expect to make available for aligned investment in new businesses to your portfolio and in follow-on investment in existing portfolio investments through the investor partnerships programme.

Your answer can be up to 500 words.

You can submit up to 3 appendices to support your answer. They must be PDFs and can be up to 20 A4 pages long and no larger than 10MB in size. The font must be legible at 100% zoom.

Question 4. Your capability as an investor partner (scored)

This question seeks to confirm your professional approach to making investments and to conducting yourself as a professional investment firm.

Describe your approach to transacting investments and how you manage your portfolio including your decision making, due diligence approach and governance processes.

Tell us about your team members involved in sourcing, transacting and managing investments in the future economy areas and those involved in making investment decisions, such as members of an investment committee. You can provide short CVs in an appendix.

Explain your involvement to date with businesses who have received funding from Innovate UK, or why you are interested in working with innovative, and intellectual-property rich companies, if this is a new approach for you.

Explain how you manage your portfolio, including:

  • your approach to portfolio management, including the level of engagement with portfolio investments
  • your approach to investor reporting
  • your approach to appointing directors (non-executive or investor) and how suitable individuals are identified
  • your approach to managing potential conflicts of interest
  • your approach to structuring investments to plan for responsible exits
  • how you deal with under-performing companies

If your capability to act as an investor partner is dependent on reasonable costs, then you must state this in your answer. These are costs that directly relate to the administration of the investor partnership programme you are proposing. You must provide details of the costs and explain why these are necessary, for example because you will be acting as investor partner on behalf of one or more angel investment groups. Investor partner costs will not be covered unless agreed by us in writing.

Your answer can be up to 500 words.

You can submit up to 3 appendices to support your answer. One appendix should describe the skills and experience of the main people involved in sourcing, transacting and managing your investments. They must be PDFs, up to 20 A4 pages long and no larger than 10MB in size. The font must be legible at 100% zoom.

Question 5. Your alignment to the future economy investor partnerships programme (scored)

This question seeks to understand your interest in the investor partnership programme.

Explain how your investment strategy and your current portfolio align with the strategic objectives of Innovate UK as outlined in the Innovate UK plan for action and how your investment strategy might change as a result of this programme.

In which areas of the future economy will you be looking to make investments in the next 3 years? Outline the key factors that influence your investment strategy.

Describe:

  • your interest in the future economy and why you believe it is an exciting area for investment
  • your anticipated activity in this area, including the distribution of investments, average transaction size and timing of investments
  • how you will use this programme to access new opportunities and why the programme will make a difference
  • your experience of investing in businesses with an innovative offering
  • your experience of investing in businesses that have demonstrated their ability to grow and scale and contribute to the UK economy and society
  • your experience of investing in and supporting investee businesses through follow-on funding and sourcing or syndicating with new investors
  • your experience of investing in organisations with mission–driven and entrepreneurial management teams or in supporting organisations to source executive and non-executive talent
  • your experience of investing in organisations with a focus on delivering social, environmental or economic impact

Your answer can be up to 500 words.

You can submit up to 3 appendices to support your answer. One should describe your relevant investment portfolio. They must be PDFs and can be up to 20 A4 pages long and no larger than 10MB in size. The font must be legible at 100% zoom.

Contact us

If you need more information about how to apply or you want to submit your application in Welsh, email support@iuk.ukri.org or call 0300 321 4357.

Our phone lines are open from 9am to 5pm, Monday to Friday (excluding bank holidays).

Innovate UK is committed to making support for applicants accessible to everyone.

We can provide help for applicants who face barriers when making an application. This might be as a result of a disability, neurodiversity or anything else that makes it difficult to use our services. We can also give help and make other reasonable adjustments for you if your application is successful.

If you think you need more support, it is important that you contact our Customer Support Service as early as possible during your application process. You should aim to contact us no later than 10 working days before the competition closing date.

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