Deliveroo CEO Will Shu.
Aurelien Morissard | IP3 | Getty Images
CEOs from 12 of the U.K.’s top tech companies have written to the government urging for emergency business relief measures to be extended to start-ups.
In a joint letter to Britain’s Finance Minister Rishi Sunak, the start-up bosses warned that loan schemes implemented to help support businesses through the coronavirus crisis “benefit established firms and do not help companies of the future such as ours.”
Many start-ups say they cannot access the emergency financing as they are not yet profitable; it is normal for venture capital-backed tech companies to prioritize growth over profitability, with the plan to make money further down the road. However, businesses applying for this government funding have to prove they would have been “viable” if not for the disruption caused by COVID-19.
“Our companies have all invested in technology and growth rather than short-term profitability, which means that we are currently unable to access the schemes which have been designed with longer-established businesses in mind,” the start-up leaders wrote.
“We are therefore writing to ask you to urgently set up a taskforce meeting of leading tech businesses to work with you and your officials to find a way for high-growth tech companies to be able to access the lending schemes you have already established or new schemes if necessary.”
Signatories of the letter include the CEOs of Deliveroo, Darktrace, Babylon, Citymapper, GoCardless, Graphcore, Improbable, Blockchain, BenevolentAI, Five AI, Bulb and Faculty.
Leading figures in the U.K.’s tech scene, including Lastminute.com co-founder Brent Hoberman, have backed proposals for an initial £300 million ($372 million) fund to help start-ups continue operating as the pandemic — which has forced the U.K. to impose lockdown measures — heavily disrupts their cash flows. The proposed “runway fund” would allocate loans that then convert into equity stakes when a start-up next raises capital.
The U.K.’s Treasury department has previously declined to comment when asked by CNBC about calls for start-up relief measures. The culture department has said it’s “committed to supporting our tech sector in these challenging times,” but is still directing start-ups to existing schemes.
France and Germany have so far led the way on start-up relief packages in Europe, releasing billions of euros in financial aid for young tech firms. This has left many U.K. tech leaders unhappy that their government hasn’t taken similar action. And tech campaign groups across the region are now lobbying for a pan-European approach to better coordinate such programs.
However, not everyone in Britain’s tech community is convinced start-ups should be bailed out by the government. Robin Klein, co-founder of U.K. venture capital firm LocalGlobe, urged against such action in an opinion piece for industry publication Sifted on Thursday.
“A bailout fund risks misdirecting much-needed capital to the wrong part of the economy,” Klein wrote. “It also creates adverse selection in a healthy and growing ecosystem.”
You can read the full letter sent by U.K. start-up CEOs to Sunak here: