Funding competition Transforming food production: series A investor partnership programme

Investors can apply to partner with Innovate UK to align their investments with up to £5 million grant funding in UK registered SMEs to transform food production towards net zero by 2040. This funding is from the Industrial Strategy Challenge Fund.

This competition is now closed.

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Competition sections

Description

Innovate UK, as part of UK Research and Innovation, is inviting investors to partner with us for this Transforming Food Production Series A Investor Partnership Programme. Together we will align Innovate UK’s grant funding of relevant late stage R&D projects alongside your investment in UK micro, small and medium-sized enterprises (SMEs) concerned with transforming food production.

We are seeking investor partners that are looking to invest in high growth potential SMEs that aspire to transform food production towards net zero emissions. The SMEs will be selected in a later competition.

The aim of this programme is to encourage investment in innovative companies with developed technologies that are working towards net zero emission productive food systems. Investor partners must provide wider business skills and experience as well as financial investment.

The Transforming Food Production Series A Investor Partnership Programme consists of 2 competitions:

  1. This investor partner selection competition, which collates and assesses applications from investors to form an investor pool. This competition is not offering any funding.
  2. The SME competition, which opens 2 November 2020. This will be for SMEs to submit project applications for grant support with a clear alignment for private investment.
The competition closes at 11 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 that want to invest in high growth potential SMEs that aspire to transform food production towards net zero emissions. The SMEs will be selected in a later competition.

Your organisation must be an equity provider with the potential to act as lead investor in Series A investments from £1 million to £5 million. Equity providers that are a charity or a trust are also eligible.

We aim to establish a ‘pool’ of lead investor partners, interested in making investments aligned with Innovate UK grants. Investments must be either direct equity or convertible loans.

You must also be able to offer other commercial acumen to SMEs, such as:

  • leadership
  • market access
  • skills or
  • resources.

No funding commitment is required at this stage. We only need your commitment to review and consider project proposals that will be selected by Innovate UK in the SME competition opening on 2 November 2020.

You must be able to demonstrate that your organisation is of good financial standing.

We are looking for a mix of established agri-tech investors alongside food-tech, social, impact and clean growth investors from the UK and overseas.

Your organisation must demonstrate it has the capability, capacity and investment appetite to fund individual SMEs that aim to achieve the ‘net zero’ objectives of the ISCF Transforming Food Production Challenge. These are:

  • the development of precision solutions and systems that will make a significant step towards net zero emissions for food production
  • improving productivity of the agricultural sector

Our preferences

We are particularly interested in investors who:

  • are willing to act as sole investor in Series A investments or be the lead investor where additional co-investment is required (co-investors can be from within or from outside of the pool being formed)
  • are prepared to deploy Series A financing with a patient and long-term view
  • can follow their investment and potentially provide more financing when required
  • can commit to helping the SMEs with international aspirations to grow and scale up
  • have relevant sector or technology-specific expertise or social impact priorities around resilient and environmentally sustainable food production

How investors are selected

The process for becoming an investor partner is selective. Applications will be assessed by independent assessors and considered by Innovate UK’s Investment Advisory Board.

By submitting an application to become an investor partner, you agree to be bound by the additional terms and conditions of the memorandum of understanding which is available in question 2 of the application. The document will not be countersigned by Innovate UK so it is not binding until you are confirmed as an investor partner.

Investor partnership opportunity

We have allocated up to £5 million to provide grant funding for SME projects aligned with private investment from investor partners.

During the SME competition, SMEs will identify their total funding requirement which will include Innovate UK grant funding aligned with Series A investment.

If your organisation is selected to be an investor partner we will identify potential UK small and medium sized enterprises (SMEs) for you to invest in.

These can be:

  • new investments for your organisation
  • opportunities currently under consideration by you
  • SMEs already in your portfolio who are looking for further investment and grant funding for a specific project element

The SMEs seeking support will be required to carry out projects that meet the objectives of the Transforming Food Production Challenge.

These are:

  • the development of precision solutions and systems that make a significant step towards net zero emissions for food production
  • improving productivity of the agricultural sector.

SME selection process

We plan to open the SME competition on 2 November 2020, with a closing date of 13 January 2021. Innovate UK will assess each project application using our independent pool of expert assessors and rank the assessed applications as fundable and non-fundable.

We will notify the pool of investors on 16 February 2021 which SMEs have projects with the potential to be funded. The SMEs will be required to secure aligned investment led by an investor partner before they can be potentially awarded Innovate UK grant funding.

Lead investor partners will be expected to undertake their normal discussions and due diligence with SMEs of interest. We will only offer aligned grant funding to SMEs that reach heads of terms with investor partners by 3 June 2021.

We expect that funded SMEs will be ready to start their projects as soon as investment has been confirmed in writing and after we have completed project finance checks.

SME project requirements

SMEs’ projects must start no later than 1 October 2021. Projects must have a duration of 18 months.

Total eligible project costs submitted by the SME must be between £1 million and £3 million. Innovate UK will provide up to 45% grant (Innovate UK grant) for eligible costs.

This funding will support experimental development projects which are nearer to market. SMEs could get grant funding for their eligible project costs of:

  • up to 45% if they are a micro or small organisation
  • up to 35% if they are a medium-sized organisation

If we select you as an investor partner you will be required to lead the aligned investment into your selected SMEs. Your investment must be at least twice the amount of the Innovate UK grant. The investment should provide suitable capital to the SME, alongside the grant, to allow them to complete their project and enable the SME to grow and scale.

The investment can be in the form of either direct equity investment or convertible loans. It can come from:

  • a single investor partner
  • a lead investor partner syndicating with other investors from within or outside of the pool

State aid

The grant is provided through state aid funding under article 25, ‘Aid for research and development projects’, of the General Block Exemption Regulation (GBER). It is the SMEs’ responsibility to make sure that they are eligible to receive state aid.

All SMEs involved must ensure that the whole project funding complies with State aid principles. SMEs are encouraged to seek independent assurance to that effect.

Applicants should note that the terms and conditions of any award granted under State aid may be subject to change due to the United Kingdom’s withdrawal from the European Union at midnight on 31st December 2020. Applicants will be informed of any amendment made.

6 August 2020
Online briefing event
13 August 2020
Competition opens
9 September 2020 12:00pm
Competition closes
16 October 2020
Applicants notified

What we will ask you

The application is split into 2 sections:

  1. Project details
  2. Application questions

1. Project details

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

Application team

Invite people from your organisation to help complete the application.

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.

You must complete this EDI survey (opens in a new window) and type ‘EDI survey completed’ within your answer. The survey will ask you questions on your 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.

Investor summary

Describe your organisation, including:

  • what type of investor you are, for example venture capital, angel network or corporate venture
  • the model by which your organisation operates its investment activities
  • whether you are regulated and if so who the regulator is
  • your preferred form of investment, such as ordinary or preferred equity, convertible loan notes or other structures
  • the maximum amount you typically invest in any one portfolio company and the total amount of investment you are likely to make each year
  • how management is incentivised
  • your expected rate of return on investment over the next 3 years

Your answer can be up to 400 words long.

Public description

SMEs will be encouraged to identify and contact suitable investors from the pool during their application process. Therefore, please provide a description of your organisation that can be published on our website for interested SMEs.

You must include:

  • a dedicated email address that SMEs can contact you on
  • your website
  • your investment criteria
  • the value you can add to investee SMEs

Your answer can be up to 400 words long.

Investee companies

Describe the types of companies you typically invest in, including their age, stage and any other investment criteria such as location or sector.

Please tell us if you have a preference for Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) qualifying companies.

Your answer can be up to 400 words long.

2. Application questions

The assessors will score your answers to questions 4 to 7. You will receive feedback from them for each one. Questions 1, 2 and 3 are not scored.

Do not include any website addresses (URLs) in your answers.

Question 1. Your financial standing (not scored)

The Innovate UK credit and risk team will carry out an assessment of your organisation’s financial standing before we decide whether to invite you to join the investor partnership programme.

Describe or explain:

  • 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 programme or by British Business Investments through its Regional Angels Programme

Your answer can be up to 400 words.

You must upload a copy of your financial statements and your assets under management 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. Memorandum of understanding (not scored)

You must download and review the memorandum of understanding. This must be signed and uploaded before submitting your application. Please type 'Completed MOU attached' as your answer to this question.

The document will not be countersigned by Innovate UK, and will not be binding until you are confirmed as an investor partner.

Question 3. Investee companies (not scored)

Describe the types of companies you typically invest in, including their age, stage and any other investment criteria such as location or sector.

Please tell us if you have a preference for Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) qualifying companies.

Your answer can be up to 400 words long

Question 4. Your credibility as an investor

This question is scored out of 25.

Please demonstrate your credibility as an investor. Please provide a summary as described below.

Describe or explain your investment strategy, including:

  • the sectors you prefer to invest in
  • any geographic constraints
  • the minimum and maximum amount of investment you typically make in each company, and the amount of investment you expect to make in each company in this investor partnerships programme
  • your historic and planned period of holding an investment
  • your historic average deal size and anticipated average deal size in the future
  • your target returns and how you plan for exits
  • whether you prefer to syndicate with other investors or not
  • your knowledge of the early-stage and Series A investment market, specifically investing in technology disruptive businesses

Describe or explain how you generate returns:

  • how you grow the businesses in your portfolio and increase their value
  • your track record in achieving successful exits for businesses you have invested in
  • failure rates and write-off levels within your portfolio
  • the investments you have completed and full or partial exits achieved in the past 2 years
  • the value that has been created in your unrealised portfolio and your plans for exit for these companies

Describe or explain how your investment impacts on companies with high growth potential. Give examples of how you and your portfolio companies have historically delivered the following objectives since you invested:

  • export growth and international expansion
  • high value job creation
  • turnover growth
  • supply chain enhancement (for example where the supply chain of portfolio companies has had a positive impact on the UK economy)

Describe or explain how you add value to your portfolio companies beyond financial support, including:

  • the expertise you can bring to actively build value in a business, including the development of business skills, recruitment, supply chain development and market access
  • how you improve portfolio company management capability during your period of ownership
  • your approach to board appointments, both in relation to representing your organisation and executive management
  • how portfolio companies have benefitted from your network in terms of increasing management capability
  • your approach to exit planning, with examples of successful and less successful exits and lessons learned

Describe or explain the types and level of fees that you (and related organisations) typically charge to portfolio companies, such as:

  • transaction fees (initial investment and follow on)
  • portfolio management fees
  • advisory or consultancy fees
  • executive and non-executive director fees
  • any changes planned to your current fee levels, particularly for companies in this investor partnerships programme

We do not expect to pay fees to any of our investor partners. However, if there is a specific reason why we should provide some support to your costs then please indicate why and how those fees should be calculated.

Your answer can be up to 800 words and 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 up to 10MB in size. The font must be legible at 100% zoom.

Question 5. Your capacity for investment

This question is scored out of 25.

Please provide a summary below explaining the amount of capital you have available for investment and how this will be deployed.

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

  • allocated capital from your balance sheet
  • capital in investment vehicles (for example limited partnerships with defined investment periods and fund terms) which are currently in their investment period
  • capital available from active business angel network participants
  • the amount of capital you expect to make available for aligned investment in investor partnerships programmes
  • your sources of funding and your investor base
  • the amount of funds that you expect to be deployed into new investments and into follow-on funding over the next 2 years
  • your track record in supporting portfolio companies with follow-on funding
  • the proportion of companies in your portfolio that you expect to receive follow-on funding

Describe or explain how you source investment opportunities, including:

  • your approach to sourcing proprietary deal flow, citing appropriate examples
  • your approach regarding leading investments or syndicating with other investors, with examples of deals completed alongside other funders
  • how you encourage diversity (for example in terms of age, gender or ethnicity) among companies seeking investment from you

Your answer can be up to 800 words and 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 6. Your capability as an investor partner

This question is scored out of 25.

Please demonstrate your capability as a lead investor below.

Describe or explain your approach to transacting investments, including:

  • your involvement to date with companies who have received funding from Innovate UK, or why you are interested in working with late stage, technology-led and intellectual-property rich companies, if this is a new approach for you
  • your decision making and governance processes in relation to committing funding to new investments and follow-on opportunities
  • your approach to diligence, for example whether this is internal or external and the type of diligence you typically undertake
  • the experience of the individuals tasked with the leadership and execution of the investment strategy in your organisation, including any current responsibilities outside of your organisation and the time allocated to each – you can include short CVs as an appendix
  • any ‘key individuals’ in relation to the operation of your organisation, explaining how the organisation would mitigate against a prolonged absence or inability to perform their duties
  • in the last year: the volume of introductions, the conversion rate and time taken from introduction to completion

Describe or explain how you manage your portfolio, including:

  • your approach to portfolio management, including the level of engagement with portfolio companies, available resources, the ratio of portfolio companies to investment professional or portfolio manager
  • your approach to investor reporting, including your reporting tools and processes
  • the experience of the individuals who are involved in portfolio management, if different to those involved in transacting new investments - you can include short CVs in an appendix
  • your approach to appointing directors (non-executive or investor) and how suitable individuals are identified
  • your approach to managing potential conflicts of interest
  • how you deal with under-performing companies

Your answer can be up to 800 words. submit up to 3 appendices to support your answer. One appendix should describe the skills of the main people vital in maintaining your portfolio of 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 7. Your alignment to the investor partnerships programme

This question is scored out of 25.

Please provide a summary of how you and your organisation align to the investor partnerships programme.

Describe or explain how your investments and your portfolio companies align with the strategic objectives of UKRI and Innovate UK:

  • 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 companies through investor partnerships programmes
  • your experience of investing in companies with an innovative technology offering and/or high levels of research and development
  • your experience of investing in companies that have demonstrated their ability to grow and scale and contribute to the UK economy, including through exporting into new markets
  • your experience of investing in and supporting investee companies through follow-on funding and/or sourcing or syndicating with new investors
  • your experience of investing in companies with entrepreneurial management teams or in supporting companies to source executive and non-executive talent

Describe or explain your interest in the investor partnerships programme and how your investment strategy might change as a result of this Series A investor partnership programme:

  • your interest in this challenge area and why you believe it is an exciting area for investment
  • the specific areas that you are potentially interested in investing in
  • details of existing investments in or closely aligned to this area
  • 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
  • team members with specific experience relating to this challenge

Your answer can be up to 800 words and you can submit a copy of as 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.

Background and further information

Extra help

If you need more information, email us at support@innovateuk.ukri.org or call the competition helpline on 0300 321 4357. Our phone lines are open from 9 am to 11:30 am and 2 pm to 4:30 pm, Monday to Friday (excluding bank holidays).

About this programme

The Transforming Food Production Series A Investor Partnership Programme aims to provide simultaneous grant funding and venture capital investment in UK-registered SMEs to support late stage R&D projects and business growth.

Innovate UK is now in a position to offer equity providers (including charities or trusts) the opportunity to join us and become investor partners on the Series A Investor Partnership.

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