Funding competition Future Economy Investor Partnerships: Investor Selection Feb 2023

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 by Innovate UK to applicant companies (SMEs) to cover a proportion of eligible project costs alongside your aligned investment from or led by one or more investor partners. The investment will typically be in the form of equity but may include other forms of funding, such as 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 technology families

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

This application closes at 11am 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 Innovation 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 any funding. Future SME competitions will provide funding in line with the Subsidy Control Act 2022. Further information about the Subsidy requirements can be found within the Subsidy Control Act 2022 (legislation.gov.uk)

Innovate UK is unable to award 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 application stage.

EU State aid rules now only apply in limited circumstances. Please see our general guidance to check if these rules apply to your organisation.

Further Information

If you are unsure about your obligations under the Subsidy Control Act 2022 or the State aid rules, you should take independent legal advice. We are unable to advise on individual eligibility or legal obligations.

You must always make sure that the funding awarded to you 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.

Funding

Innovate UK has allocated up to £80 million to fund innovation projects, aligned with investment from investor partners. Funding will be offered through regular rounds of the SME competition from July 2022 to 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 studies, industrial research and experimental development projects:

  • feasibility studies can have eligible project costs from £50,000 to £300,000, 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 £100,000 to £1 million, 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 £250,000 to £2 million, 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

Your proposal

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. The broad theme areas are:

  • net zero
  • health and wellbeing
  • next generation digital technologies and technology families

Innovation and ideas can come from anyone and anywhere. We want to see investments unlocked for the diverse and extraordinary talent in the UK. We are encouraging diverse applicants and inclusive project applications, pushing beyond the status quo.

We encourage innovation involving communities that are typically under-represented, including:

  • from regions that have historically accessed lower levels of investment (outside London, Oxford and Cambridge)
  • ethnic minority groups
  • women and other marginalised genders
  • disabled people
  • people with non-traditional education backgrounds

To support this, we also have a targeted theme on equality, diversity and inclusion (EDI).

Specific themes

The investor partnership programme will be focused on specific themes for the future economy areas that include:

Net Zero

  • capital intensive technologies
  • power – particularly offshore wind, civil nuclear, hydrogen, carbon capture and storage, and whole systems integration
  • heating and retrofit
  • mobility
  • resource efficiency for materials and manufacturing
  • critical circular materials
  • battery technologies for transport and energy storage (Faraday Battery Challenge)

Health and Wellbeing

  • innovative solutions to health and healthcare challenges (Biomedical Catalyst)
  • the application of extended reality for digital mental health, including immersive content that could be delivered as a digital mental health therapeutic in formal healthcare settings (Mindset)
  • controlled environment agriculture and alternative proteins

Next generation digital technologies

  • projects within the creative industries which are underpinned by innovative digital technology as well as sustainable innovations, such as circular fashion (Creative Catalyst)
  • adoption of artificial intelligence and machine learning technologies in targeted industries (Bridge AI)

Knows No Limit

  • innovations from diverse founders or senior decision-makers that are from under-represented groups and are role models
  • innovations outside of the future economy theme areas, including those that support under-served communities and groups

These programmes are described in more detail on the Investor partnership website

20 February 2023
Competition opens
28 February 2023
Online briefing event: watch the recording
29 March 2023 11:00am
Competition closes
22 May 2023
Interview panel
24 May 2023 12:47pm
Applicants notified

Before you start

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 3 to 6. 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.

Your answer to question 2 will be reviewed and considered by the investor selection panel as an important part of our decision-making process to encourage inclusivity in investment.

What we ask you

The application is split into 2 sections:

  1. Investor details.
  2. Application questions.

Accessibility and inclusion

We welcome and encourage applications from people of all backgrounds and are committed to making our application process accessible to everyone. This includes providing support, in the form of reasonable adjustments, for people who have a disability or a long-term condition and face barriers applying to us. Read more on how we are making our application process more accessible and inclusive for everyone.

You must contact us as early as possible in the application process. We recommend contacting us at least 15 working days before the competition closing date to ensure we can provide you with the most suitable support possible.

You can contact us by emailing support@iuk.ukri.org or calling 0300 321 4357. Our phone lines are open from 9am to 5pm, Monday to Friday (excluding bank holidays).

Interviews

If you are asked to attend an interview it will be conducted virtually.

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

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.

All applicants must complete this EDI survey and then select yes in the application question. The survey will ask you questions on you and your organisation’s management and investment teams, including gender, age, ethnicity and disability status. You will always have the option to ‘prefer not to say’ if you do not feel comfortable sharing this information. Your response to this EDI survey is not made available to assessors or the selection panel and do not form part of our selection process.

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. Describe your investment in businesses with founders from under-represented groups and those that support under-served communities. 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

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 approach to equality, diversity and inclusion (not scored)

Describe how you encourage diversity within your management team and portfolio companies, for example in terms of age, disability, gender, socio-economic background or ethnicity, and among companies seeking investment from you to ensure that you have an investment strategy and approach that is inclusive and does not limit access to capital for innovators from under-represented groups. Examples or evidence of the impact along with any statements or policies can be included as appendices.

Your answer can be up to 400 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 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 pecifying 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.

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 4. 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 5. 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. Provide information about your involvement in previous Innovate UK investor partnership programmes if this is applicable.

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

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 6. 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.

Data sharing

This competition is operated by Innovate UK.

Innovate UK is directly accountable to you for its holding and processing of your information, including any personal data and confidential information. Data is held in accordance with our own policies. Accordingly, Innovate UK will be data controllers for personal data submitted during the application. Innovate UK’s Privacy Policy is accessible here.

Innovate UK complies with the requirements of GDPR, and is committed to upholding the data protection principles, and protecting your information. The Information Commissioner’s Office also has a useful guide for organisations, which outlines the data protection principles.

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).

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