Funding competition ISCF Healthy Ageing Investment Accelerator: round 1

Investors can apply to distribute grant funding from Innovate UK with private equity investment into UK businesses to deliver innovation in the healthy ageing market. Grant funding is from the Industrial Strategy Challenge Fund.

Competition opens: Monday 19 August 2019
Registration closes: Wednesday 30 October 2019 12:00pm

This competition is now closed.

Description

Innovate UK, part of UK Research and Innovation, is inviting UK registered investors to partner with us. Together we will distribute a share of up to £12 million in grants to micro, small or medium-sized enterprises (SMEs) and social enterprises registered in the UK, alongside private equity capital. Grant funding is from the Industrial Strategy Challenge Fund.

The aim of this competition is to encourage early private investment in innovative healthy ageing technologies, including products, services and business models. This is phase 1 of a 2 phase competition. The second phase will be open to SMEs to apply for grant funding and equity investment.

The investor partners we select, will work over a 2 year timeframe after we pay them the grant funding (approximately March 2020 to March 2022) to:

identify innovative SMEs working in ‘healthy ageing’ technology that are suitable for investment but outside your typical risk preference, which might involve changing your target market
help those SMEs deliver a healthy ageing project, with 50% of the total eligible project costs grant funded and the remaining 50% from equity investment into the business

Over a further year (approximately March 2022 to March 2023) the investor partners will manage any remaining grant deployment to ongoing projects.

We will only offer grant funding to SMEs with research and development projects we consider to be highly innovative.

This partnership approach aims to improve access to the financial and commercial support SMEs need to develop and market innovations in the healthy ageing market. Investor partners must provide wider business skills, networks and experience as well as capital investment.

This competition closes at midday 12pm UK time on the deadline stated.

Funding type

Grant

Project size

You can apply to receive grant capital of between £1 million and £6 million to distribute to SMEs alongside your equity investment.

Who can apply

Phase 1: investor partners

In this competition we are looking for investor partners. To join as an investor partner, you must be an equity provider with an established company holding a full UK registration at Companies House. This can include charities and trusts with the power to make investments.

You can apply for a grant allocation of between £1 million and £6 million. In order to balance the portfolio of investor partners and ensure best value for money, our offer might be different from the amount you applied for. Your application should outline the minimum amount of grant you would be prepared to operate with, and the maximum you feel you could effectively allocate.

If you want to apply for more than £6 million please contact support@innovateuk.ukri.org at least 10 days before the competition closes. We will decide whether to approve your request.

You must be able to demonstrate that:

between 2020 and 2023 you can invest into innovative companies a sum that is at least equal to the grant funding they are applying for
you can commit to give follow-on funding of at least 3 times the grant allocation amount to successful micro, small or medium-sized enterprises (SMEs) and social enterprises by 2025
you have suitable arrangements in place to meet all operational requirements, such as promotion, distributing and managing public money responsibly, reporting on the portfolio performance, allocation of investments, confidentiality and data protection

We are particularly interested in investors who can:

demonstrate the interest, capability and capacity needed to invest in early-stage companies, including university spin-outs and businesses looking for their first investment opportunities
demonstrate the ability to add value beyond their investment
commit to helping the company grow and scale
show they have access to relevant sector and technology-specific expertise

We will decide which investors to appoint as partners. Our considerations will include (but not be limited to):

geographic coverage and reach
financial standing and good character
track record and/or forward plan
evidence of how this programme will help you to take a different approach to investing in early stage technology SMEs

Phase 2: SME projects

Once selected, each investor partner will identify suitable UK registered SMEs or social enterprises who wish to carry out an innovative research and development (R&D) project in the healthy ageing market. These can include:

new deal flow for you
SMEs already in your portfolio who are looking for further investment and grant funding for a specific project

You will be able to put forward SMEs to apply to an invitation-only competition from March 2020. Projects can last up to 2 years. Projects must end and the full grant allocation must be deployed by March 2023.

Total eligible project costs (including grant and investment) will be finalised in discussion with successful investor applicants. We expect that projects will have total eligible costs of between £100,000 and £1.5 million.

All eligible SME applications will be assessed by expert and independent assessors and Innovate UK will rank them as fundable and non-fundable. This will be independent from any discussions between investor partners and applicants. Only projects assessed as fundable by Innovate UK will be eligible to receive grant funding through you.

State aid

The businesses claiming funding in the SME competition must be eligible to receive state aid at the time we confirm they will be awarded funding. If they are unsure, they should take legal advice. For further information see our general guidance.

Funding

Up to £12 million grant funding is available to support up to 50% of the total eligible project costs of UK registered SMEs. To receive grant funding the SME must raise at least the same amount of equity capital from an approved investor partner.

During phase 1, we are looking to select up to 6 investors to partner with Innovate UK. As an investor you will receive a share of the total available grant to distribute to SMEs alongside your equity investment during phase 2.

You will be responsible for holding and distributing the allocated grant capital. All partners must comply with the requirements set out in the government’s guidance on managing public money.

We will distribute grant capital quarterly in arrears, subject to ongoing monitoring of the project. You must provide a pro-rata amount of the equity investment either before or at the same time as the grant capital.

Investor partners can draw management fees from the grant allocation, in line with the agreed fee schedule. Innovate UK will invoice you for the following costs to be deducted from the grant allocation:

assessment costs for each SME application
monitoring costs for each funded project

The subsequent SME competition will provide state aid funding under article 25, ‘aid for research and development projects’, of the General Block Exemption Regulation 2014 (GBER).

You should ensure that SMEs seek independent advice on how to interpret the requirements and to make sure that their organisation is eligible for state aid.

Your proposal

The aim of this competition is to encourage early private investment in innovative healthy ageing technologies that would not otherwise be supported within an investor’s risk strategy. This could include targeting a new market. This partnership will help develop and take to market innovations in the healthy ageing market that have clear potential to be adopted at scale.

Your proposal must outline:

how you will invest alongside grant capital to develop new products, services and business models
how you will take the portfolio companies to market and maximise their fast growth potential
how this will differ from your normal investment activity
how you intend to generate a measurable, beneficial social and economic impact in the healthy ageing space alongside a market-facing commercial return
how you will add value to the growth potential of investee businesses over and above the investment made
how you will attract innovative companies seeking investment in the healthy ageing market
your strategy for encouraging diversity (for example age, gender or ethnic diversity) among the applicant companies
the operational costs you expect to incur to deliver the planned investment strategy and grant distribution

You must demonstrate you have processes in place to:

manage the grant allocation responsibly
carry out administration of the fund
work with the funded companies
syndicate with other investors if applicable
report on the performance and progress of the funded companies
provide agreed information to Innovate UK
promote the opportunity openly to maximise deal flow additional to your existing target markets

Innovate UK’s assessment process will provide an independent view on the technical and commercial quality of the proposed research and development projects.

In phase 1 we are looking to select a portfolio of investor partners working across the specific themes for this competition and to ensure value for money.

In phase 2, in partnership with successful investor applicants, we will look to fund a broad portfolio of SME projects from 2020 onwards.

The process for becoming an investor partner is competitive. Your written application will be assessed by independent assessors and we will select a shortlist to invite to interview. We will also undertake basic due diligence checks on applications, drawing on publicly available information as well as your application.

Following the interviews, the panel will select the preferred investor partners. We will notify applicants of the result and provide feedback.

All decisions will be final and we will not enter into any discussion. Each decision is subject to further detailed due diligence checks and the successful conclusion of contractual and on-boarding arrangements. As part of this process we may seek permission to speak with your portfolio companies.

Innovate UK will keep the right to withdraw its initial offer at any time during this period at its sole discretion.

Before submitting an application to become an investor partner, you should read the template allocation agreement, which will be available to download from the secure file transfer site after you register for the competition (this will now be available early in September.). Allocation will be confirmed by February 2020, by which time you must sign the legal allocation agreement and commit to Innovate UK’s requirements around confidentiality and information security.

Specific themes

SME projects funded through this programme must address specific themes from the ISCF healthy ageing challenge framework. The challenge has 7 themes. An independent review by the Centre for Ageing Better found these themes offer the best opportunity to solve market failures and encourage innovation.

Your project must focus on one or more of the following:

sustaining physical activity
maintaining health at work
designing for age-friendly homes
managing common complaints of ageing
living well with cognitive impairment
supporting social connections
creating healthy and active places

Investors can choose to focus their innovations on a number of these themes. For example, innovations could address the combined themes of sustaining physical activity, supporting social connections and creating healthy and active places.

Research categories

We expect SME projects funded through this programme to fall under the feasibility studies or industrial research category, as defined in the general guidance.

Projects we will not fund

In the SME phase of this competition, we will not fund projects that:

are purely at the technical feasibility or proof of concept stage, unless they have a single, short milestone that may be required to reach go/no-go decision to rapidly move into product development and/or proof of market studies
are not carried out by SMEs
are collaborative R&D projects
are carried out by SMEs that are not attracting at least the same amount of private investment into the SME
are not part of a company’s plan for business growth
cannot present evidence that their idea or concept has the potential to lead to significant return on investment, growth and scale-up of the business
are large capital infrastructure such as new buildings

19 August 2019: Competition opens
23 August 2019: Briefing event recording
10 September 2019: London briefing event
30 October 2019 12:00pm: Registration closes
6 November 2019 12:00pm: Competition closes
9 December 2019: Start of interviews
13 December 2019: Applicants notified

Before you start

To apply:

Register online using the green button.
You will receive an email acknowledgement of your registration followed by a second email up to 48 hours later. The second email will contain a username and password to register for our secure upload facility along with a unique application number and form. You must only use the application form provided.

We will not accept late submissions. Your application is confidential.

You must use Microsoft Word for the application form or your application will be ineligible.
The space provided in each field of the form is fixed. You must restrict your responses in each of the fields to the space provided. The typeface, font size and colour are predetermined and cannot be changed. Illustrations, graphics and hyperlinks cannot be included in the application form.
You should be able to see your total answer to the question when looking at the application form in print view. Any text that cannot be seen in this view or when the form is printed will not be assessed.

You must read the general guidance for applicants before you start.

Interviews

If your written application is successful you will be invited to attend an interview, where you must give a presentation.

Before the interview, by the deadline stated in the invitation email, you must send:

a list of who will attend the interview
your interview presentation slides

List of attendees

Up to 3 people from your team can attend. They must all be available on all published interview dates. We are unable to reschedule slots once allocated.

Presentation slides

Your interview presentation must:

use Microsoft PowerPoint
be no longer than 10 minutes
have no more than 10 slides
not include any video or embedded web links

You cannot change the presentation after you submit it.

Interview

After your presentation the panel will spend 25 minutes asking questions. You will be expected to answer based on your application form, the assessor feedback and the due diligence feedback from the written stage.

What we will ask you

The application is split into 2 sections:

Project details.
Application questions.

Project details

The lead applicant must complete this section. Please provide details about your organisation and state the amount of grant allocation you are applying for.

This section sets the scene for the assessors and is not scored.

Investor partner details

Describe the type of investor you are, for example:

private equity
venture capital
corporate venture capital

Explain how your business is structured, how capital is raised and the current capital available in support of this proposal.

Eligibility

Describe how you meet the eligibility requirements for this competition.

Investor description for public use

Provide a description that you are happy to see published of your investment interests and what benefits you can bring to an SME. Do not include any commercially sensitive information.

You must explain:

the type of investor you are (private venture capital, charity, corporate venture capital and so on)
your intended investment scope for this programme
the added value of your investment beyond the capital itself

We will use this description to brief potential SME applicants looking for investment. We may also use it to promote the Investor Partnerships Programme if you are chosen as an investor partner.

2. Application questions

The assessors will score your answers for questions 1 to 10. You will receive feedback from them for each one.

Your answer to each question can be up to 1 page of A4. Do not include any URLs in your answers.

Question 1: Investment criteria

Innovate UK wants to give equal opportunity to companies seeking funding and investment across the whole of the UK. Do you have any constraints in terms of investments?

Describe:

any geographic limitations around where you can invest, your existing footprint and any plans to extend your reach through this proposal
whether geographic or technological overlap with your existing portfolio influences your decision to invest
any limitations on when and for how long you intend to invest
any restrictions around the timing and availability of capital, such as whether fund raising is subject to syndication

Question 2: Capital

What approach will you take to investing capital?

Describe:

the sources of your capital available for investment
how much capital you have available to invest into this competition and how you will meet the requirement to provide investment at least equal to Innovate UK’s grant allocation from 2020 to 2023
how you will generate sufficient investments into relevant businesses carrying out suitable innovation projects to fully commit the grant funding alongside equity investment within 2 years
how you intend to meet the requirement to have 3 times the initial grant allocation of investment capital available for follow-on funding by 2025
the proposed typical structures of your investments in this grant programme
your strategy for holding investments linked to this proposal and how this compares to your typical approach
evidence around your typical investment size at each stage of company development and how this compares with the investment approach in this proposal
whether you prefer to invest alone or in syndication with other investors
your fee structure with respect to applicant SMEs throughout the life of the application and investment management cycle

In a separate appendix named ‘AppendixQ2-(application number)’ you can submit in PDF format up to 10 A4 pages to support your answer. You can include charts and diagrams The font must be legible at 100% zoom.

Question 3: Investment timing and rounds

Innovate UK typically issues grants to companies developing highly innovative, disruptive technologies. Through the Investment Accelerator, we are keen to encourage private investment into these companies. What types of companies do you invest in and how will you change your approach for this competition?

Tell us:

how you will adjust your investment strategy for this programme
the earliest stage of company development you would intend to invest in
whether you are prepared to invest in university spin-out companies, and any constraints on the universities you work with
the total number of companies in your portfolio
how many of these companies first took investment from you between £100,000 and £1.5 million
the number of exits, initial public offerings (IPOs) or mergers and acquisitions achieved by investee companies in the last 5 years
how you will develop the capability to assess and support companies coming through this programme
your target return multiple for this proposal and how this compares to your typical target return multiple, plus your performance against target over the past 5 years
whether you intend to fund over several rounds of investment
the decision matrix for investments and divestments, including the governance arrangements

In a separate appendix named ‘AppendixQ3-(application number)’ you can submit in PDF format up to 10 A4 pages to support your answer. You can include charts and diagrams. The font must be legible at 100% zoom.

Question 4: Investment scope

The ISCF Healthy Ageing Investment Accelerator will increase funding and investment in businesses that aim to support people as they age, allowing them to remain active, productive, independent and socially connected across generations for as long as possible. What is your interest in the field of healthy ageing?

Describe or explain:

your interest in the field of healthy ageing technologies and why you believe it is an exciting area for investment
how many investments you intend to make a year in this programme
the investment opportunities you are interested in: products, services, business models and so on
which of the 7 themes you will focus your investment in: sustaining physical activity, maintaining health at work, designing for age-friendly homes, managing common complaints of ageing, living well with cognitive impairment, supporting social connections, creating healthy and active places
any investments you currently have that could be classed as healthy ageing
your anticipated future portfolio of healthy ageing companies, including the distribution of investments, average transaction size and timing of investments
how you will use this programme to access new opportunities in the healthy ageing space

Question 5: Added value of your investment

Innovate UK has established the Investor Partnerships Programme because we recognise the added value an investor can bring to companies beyond the investment capital itself. What additional value can you provide to companies in this programme?

Describe or explain:

what expertise you can bring to actively build value in a business, including the development of business skills, recruitment, supply chain development, market access and so on
what expertise you can bring to a company specifically operating in the field of healthy ageing
what relevant sector and technology specific expertise you have
how your investment will use Innovate UK grant funding to help scale and grow innovative UK companies operating in the broad field of healthy ageing
how you will encourage diversity (for example in terms of age, gender or ethnicity) among the companies seeking investment

Question 6: Impact of the Investor Partnerships Programme

The Investor Partnerships Programme at Innovate UK has been established to encourage private investment into early-stage, innovative UK companies.

How would your investment into these grant funded projects impact the Healthy Ageing challenge?

Describe or explain:

the anticipated outputs for the Healthy Ageing challenge
the difference being an investor partner would make to your fund, such as giving you a faster route to market or reducing risk
how being an investor partner would change the nature of your investment activity, such as enabling you to invest at an earlier stage, widening your technology portfolio, investing in different types of businesses or investing in more risky R&D within your portfolio
what would, or would not, happen if your application to become an investor partner is unsuccessful

Question 7: Raising awareness and engaging with businesses

How will you raise awareness of this opportunity and engage with suitable businesses?

Describe or explain:

your strategy for raising awareness about the opportunity amongst the entrepreneurial community
how you will engage specifically with businesses in the healthy ageing space
how you will ensure the opportunity is promoted to a diverse range of company founders (for example in terms of age, gender or ethnicity)
your strategy for promoting the programme to potential investee companies to attract suitable healthy ageing projects for grant funding by Innovate UK from the allocation, alongside your private investment

Question 8: Investor partner team

Who is in the team and what are their roles?

Describe or explain:

the roles, skills and experience of all members of the team who will be responsible for delivering the programme and their forecast time commitment to delivering this proposal
how the team will be incentivised to ensure the programme objectives are met
any roles you will need to recruit for

In a separate appendix named ‘AppendixQ8-(application number)’ you can submit in PDF format up to 10 A4 pages to support your answer. The font must be legible at 100% zoom.

Question 9: Process management and tracking the portfolio

How will you manage the operational processes and track the portfolio of grant funded companies?

Describe your processes for:

identifying potential applicant companies with suitable innovation projects for grant funding
managing the allocation of grant awards to successful applicants
syndicating with other investors, if applicable
tracking and reporting on applicants for project grant funding and for equity investment

Question 10: Financial information and operational costs

How much grant allocation are you applying for and what will your costs be to manage this funding?

Describe:

the preferred amount of grant allocation you are applying for and the rationale for this
the minimum amount of grant allocation you would be prepared to operate with
the maximum amount of grant allocation you feel you could effectively allocate to businesses within the time period
your anticipated costs for managing the distribution of grant funding and how this represents value for money for you and the taxpayer
how your costs might change depending on the amount of allocation you receive
the financial standing of your business, including but not limited to assets under management, long term liabilities, provisioning and returns to investors

You should include historic and forecast financial information about your fund showing that it will have the financial capacity to manage an allocation of funding on behalf of Innovate UK.

You must provide a separate appendix named ‘AppendixQ10A-(application number) in PDF format up to 2 A4 pages. It must show the schedule of fixed charges for the 3 year deployment of the allocation. You should account for VAT as described in section 7 of the allocation agreement. You must agree to these charges as part of schedule 2 of the allocation agreement ‘investor partner management and operational charges’. The agreement will be ready to view once the competition is officially open.

In a separate appendix named ‘AppendixQ10B-(application number)’ you can submit in PDF format up to 10 A4 pages for additional financial information, including historic and forecast balance sheet, profit and loss income and expenditure, and cash flow statements.

The font must be legible at 100% zoom for both appendices.

Question 11: Legal structure

What is the legal structure of your fund?

Describe:

the legal structure of the fund, or entity, proposed to hold and manage the distribution of grant funding
the controls and oversights in place over the processes and how decisions are taken within that entity

In a separate appendix named ‘AppendixQ11-(application number) you can submit in PDF format up to 5 A4 pages to support your answer. The font must be legible at 100% zoom.

This question is not scored but will be used during our due diligence review.

Background and further information

The ISCF Healthy Ageing Investment Accelerator round 1 aims to provide grant funding to innovative businesses in support of a defined research and development project aligned with equity investment in those businesses from Investor Partners.

We are now in a position to offer equity providers (including charities or trusts) with a UK presence the opportunity to join Innovate UK and become investor partners on the ISCF Healthy Ageing Investment Accelerator round 1.

If you need more information, email us at support@innovateuk.ukri.org or call the competition helpline on 0300 321 4357 between 9am and 5:30pm, Monday to Friday.

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