1 00:00:06,400 --> 00:00:09,700 Hello, I'm Sam burchill reporter at Real Deals and welcome to 2 00:00:09,700 --> 00:00:13,000 today's podcast on how private Equity is navigating 3 00:00:13,000 --> 00:00:16,600 government-backed Aid during and following the pandemic at the 4 00:00:16,600 --> 00:00:20,300 start of the covid-19 crisis, government announced a wave of 5 00:00:20,300 --> 00:00:23,100 loans to assist businesses through economic stress. 6 00:00:23,100 --> 00:00:27,600 And Yet Market, and participants have really struggled to access 7 00:00:27,600 --> 00:00:29,800 funding. What then have been the 8 00:00:29,800 --> 00:00:32,100 challenges? What has this pandemic revealed 9 00:00:32,100 --> 00:00:34,700 about the relationship between private equity and the 10 00:00:34,700 --> 00:00:38,000 government? And most importantly, as fairly 11 00:00:38,000 --> 00:00:40,800 schemes and access to government Aid, comes to an end. 12 00:00:40,900 --> 00:00:43,400 What does the future hold for private equity and Venture 13 00:00:43,400 --> 00:00:46,200 Capital backed businesses? Here to answer. 14 00:00:46,200 --> 00:00:49,400 These questions is political risk, expert Lizzie Wills 15 00:00:49,700 --> 00:00:53,700 director of investor services at wa Communications and joining us 16 00:00:53,700 --> 00:00:56,300 for our legal perspectives is whiten case partner. 17 00:00:56,300 --> 00:00:59,800 Daniel toggle. Hi Beau, thank you for joining 18 00:00:59,800 --> 00:01:02,000 me today. It's a real pleasure to have you 19 00:01:02,000 --> 00:01:04,800 both speak on this topic. And as it's one, that's really 20 00:01:04,800 --> 00:01:09,700 been front and center and on the agenda of most firms and and 21 00:01:09,800 --> 00:01:13,700 businesses. So, just to set the scene, Lizzy 22 00:01:13,700 --> 00:01:15,800 as a political risk expert leading. 23 00:01:15,800 --> 00:01:17,900 Wa s investor Services, practice. 24 00:01:18,000 --> 00:01:21,900 What has your role and wa has been throughout this whole 25 00:01:21,900 --> 00:01:26,500 pandemic? Thanks so much for having me on 26 00:01:26,500 --> 00:01:32,000 the podcast. Our role has, typically been 27 00:01:32,100 --> 00:01:36,100 before the pandemic supporting investors, understand the 28 00:01:36,100 --> 00:01:39,300 political context for investment decisions. 29 00:01:40,100 --> 00:01:43,400 And this has obviously changed quite significantly over the 30 00:01:43,400 --> 00:01:47,400 course of the pandemic and over lockdown in particular, when the 31 00:01:47,400 --> 00:01:51,200 number of m&a, transactions has has greatly reduced. 32 00:01:52,000 --> 00:01:57,000 So what we Spent the majority of our time doing has been 33 00:01:57,000 --> 00:01:59,500 supporting investors. In other ways, particularly, 34 00:01:59,500 --> 00:02:04,300 helping their management teams to understand the vast amount of 35 00:02:04,300 --> 00:02:07,600 information coming out of government and helping them 36 00:02:07,600 --> 00:02:10,800 navigate that. And obviously a huge part of 37 00:02:10,800 --> 00:02:14,400 that has been understanding the business support schemes, how 38 00:02:14,400 --> 00:02:17,800 they work the eligibility criteria around them and how 39 00:02:17,800 --> 00:02:21,900 they can best use government to support to to help their 40 00:02:21,900 --> 00:02:23,400 businesses over the longer. Time. 41 00:02:25,100 --> 00:02:27,600 Thanks Lizzy. And thanks for being here again. 42 00:02:28,300 --> 00:02:31,900 And Dan coming over to use of, what was your role at White and 43 00:02:31,900 --> 00:02:34,600 casein, and what's been your experience with the various 44 00:02:34,600 --> 00:02:37,300 bailout schemes, from the start of the pandemic. 45 00:02:38,000 --> 00:02:42,600 My name is Dan Tagle. I am a corporate partner in the 46 00:02:43,600 --> 00:02:48,700 London M80 matte white and case. Thank you very much, Sam and 47 00:02:49,100 --> 00:02:53,000 Dean Z or having the And discussing is automatic. 48 00:02:54,600 --> 00:03:00,400 I carry leads our boss growth, practice across Amia and helped 49 00:03:00,400 --> 00:03:02,600 investors on a portfolio companies. 50 00:03:02,800 --> 00:03:06,200 Beginning of the crisis, particularly looking at what 51 00:03:06,200 --> 00:03:09,100 measures are available and helping them navigate through 52 00:03:09,400 --> 00:03:13,600 the tough times and reducing Runway and seeing how they can 53 00:03:13,600 --> 00:03:17,000 position themselves in the most efficient manner going forward. 54 00:03:17,400 --> 00:03:20,400 I also was advising someone who participants in relation to the 55 00:03:20,400 --> 00:03:23,600 Future funds when it was being launched initially. 56 00:03:24,200 --> 00:03:28,000 And I would go to the government in relation to the terms and 57 00:03:28,000 --> 00:03:31,400 helped clarify. And why didn't the applicability 58 00:03:31,400 --> 00:03:35,100 of those to Market to Market participants generally? 59 00:03:36,100 --> 00:03:38,000 And since the future fund has been launched. 60 00:03:38,000 --> 00:03:42,500 I've helped numerous companies access to Future fund itself. 61 00:03:43,000 --> 00:03:46,000 And I also have clients who are Lendl under Sybil's 62 00:03:46,000 --> 00:03:49,500 arrangements, and clients who are or was under was wrong. 63 00:03:51,400 --> 00:03:52,800 Great. Thanks for that to Ann. 64 00:03:53,400 --> 00:03:55,400 And thank you both so much for being here. 65 00:03:55,400 --> 00:03:58,200 It seems like you both really been in their eye of the storm 66 00:03:58,200 --> 00:04:01,100 during the whole crisis. It's really great to be able to 67 00:04:01,100 --> 00:04:03,000 have this discussion with you today. 68 00:04:04,200 --> 00:04:07,200 Lizzie. So as we as we all know from the 69 00:04:07,200 --> 00:04:10,500 very start that was a certain sort of lack of clarity in how 70 00:04:10,500 --> 00:04:14,900 the scheme's worked and which businesses were eligible for the 71 00:04:14,900 --> 00:04:19,000 loans, from your perspective. What were the main problems that 72 00:04:19,000 --> 00:04:23,200 he firms and P back to business. But facing when access accessing 73 00:04:23,200 --> 00:04:27,800 these bailout loans. Yes, as you say, we've had, 74 00:04:28,400 --> 00:04:33,600 we've had a busy few months advising investors on what this 75 00:04:33,600 --> 00:04:35,800 all looks like and what the ramifications are for their 76 00:04:35,800 --> 00:04:39,200 business. I think, when the schemes were 77 00:04:39,300 --> 00:04:42,500 initially announced what was quite interesting to see was 78 00:04:42,500 --> 00:04:46,400 that because this was such an unprecedented time for the 79 00:04:46,400 --> 00:04:48,500 government. The policy-making was almost 80 00:04:48,500 --> 00:04:51,200 made, you know, front and center. 81 00:04:51,200 --> 00:04:55,600 It was being made in public and some of the schemes that were 82 00:04:55,600 --> 00:04:58,400 announced. In normal circumstances would 83 00:04:58,400 --> 00:05:01,400 have taken, you know, to three months of quite detailed 84 00:05:01,400 --> 00:05:05,800 deliberation behind the scenes and we actually saw it sort of 85 00:05:05,800 --> 00:05:09,900 being made in real time. And I think that was inevitably 86 00:05:09,900 --> 00:05:15,200 going to lead to some confusion and some lack of clarity around 87 00:05:15,500 --> 00:05:17,800 what the scheme is actually meant in practice. 88 00:05:18,400 --> 00:05:21,400 In particular, very early on. There was a lot of confusion 89 00:05:21,400 --> 00:05:25,900 trying to, essentially bridge the gap between what the 90 00:05:26,000 --> 00:05:29,300 announcements that were coming out of Treasury were and what 91 00:05:29,300 --> 00:05:32,500 was actually in the small print, in terms of the eligibility 92 00:05:32,500 --> 00:05:38,800 criteria, particularly as it's as it was regarding private 93 00:05:38,800 --> 00:05:41,400 Equity businesses who are obviously in a slightly 94 00:05:41,400 --> 00:05:47,800 different different category, then you got to the the sort of 95 00:05:47,800 --> 00:05:50,600 the navigating, the actual application processes 96 00:05:50,800 --> 00:05:55,300 themselves, which which proved a whole new challenge particularly 97 00:05:55,300 --> 00:05:59,900 given each of Accredited lenders were being told specifically by 98 00:06:00,600 --> 00:06:03,700 the British Business Bank at the time that they were individually 99 00:06:03,700 --> 00:06:07,700 responsible for interpreting that eligibility criteria. 100 00:06:08,600 --> 00:06:11,800 When they were deciding to approve or not approve those 101 00:06:11,800 --> 00:06:13,900 loans. So what you ended up with was 102 00:06:13,900 --> 00:06:17,200 quite a significant variation between the different lenders 103 00:06:17,600 --> 00:06:21,000 and you had a sort of a series of Chinese Whispers going 104 00:06:21,000 --> 00:06:25,700 around, the P industry about you know, which banks were taking a 105 00:06:25,700 --> 00:06:27,900 more. More or less aggressive stance 106 00:06:27,900 --> 00:06:32,000 in relation to the eligibility of P backed businesses. 107 00:06:33,800 --> 00:06:39,300 So, quite early on the main questions that PA seem to be 108 00:06:39,300 --> 00:06:42,700 struggling with in particular was whether some of these loans 109 00:06:42,700 --> 00:06:46,700 would be decided on the basis of the aggregate size of the fund, 110 00:06:47,000 --> 00:06:50,600 in which case, many investors breached that upper turnover 111 00:06:50,800 --> 00:06:55,000 threshold or whether it was being judged on the basis of the 112 00:06:55,000 --> 00:06:56,600 individual. Companies. 113 00:06:57,500 --> 00:07:01,000 So there's been a lot for them to get their head around. 114 00:07:01,000 --> 00:07:05,800 And as I say, a lot of this policy making was being made in 115 00:07:05,800 --> 00:07:09,100 real time. They were being changes, made to 116 00:07:09,100 --> 00:07:13,000 them as a result of various sorts of lobbying efforts, 117 00:07:13,500 --> 00:07:16,500 particularly from some of those parts of the economy that felt 118 00:07:16,500 --> 00:07:21,100 that they were perhaps being left behind or not addressed in 119 00:07:21,100 --> 00:07:23,900 terms of some of those business support loans. 120 00:07:23,900 --> 00:07:29,000 So yes, lots of challenges For PE to to get their head their 121 00:07:29,000 --> 00:07:31,700 heads around. Yeah, it certainly keeps your 122 00:07:31,700 --> 00:07:36,000 job, very busy. And I just wanted to touch on 123 00:07:36,000 --> 00:07:37,600 something quite interesting that you mentioned. 124 00:07:37,600 --> 00:07:40,800 There's been a bit of controversy around kind of a lot 125 00:07:40,800 --> 00:07:43,000 of private Equity owned companies or rejected from 126 00:07:43,000 --> 00:07:45,400 receiving loans. Because of the way, the industry 127 00:07:45,400 --> 00:07:48,300 has relied on a Model that can cut their tax bills but leaves 128 00:07:48,300 --> 00:07:51,500 them with debt and was it, was there a sense that the 129 00:07:51,500 --> 00:07:55,700 government was purposely trying to prevent P Backed Aid, Lizzie 130 00:07:57,500 --> 00:08:01,300 I don't know if it was a question of PE being purposely 131 00:08:01,600 --> 00:08:05,200 shutout of the scheme's. I think the way in which some of 132 00:08:05,200 --> 00:08:10,100 these schemes were introduced possibly didn't take into full 133 00:08:10,100 --> 00:08:14,300 account of how P back to business has worked, and some of 134 00:08:14,300 --> 00:08:17,900 the levels of debt that some of them had on their books. 135 00:08:19,000 --> 00:08:22,700 I don't think we can extrapolate from the way that government has 136 00:08:22,700 --> 00:08:25,900 necessarily behaved in terms of setting out these loans. 137 00:08:26,000 --> 00:08:29,800 Is that it was sort of anti private Equity, but I think 138 00:08:29,800 --> 00:08:35,600 certainly there has been a misunderstanding or a lack of 139 00:08:35,600 --> 00:08:40,299 understanding at government level about how PE operates and 140 00:08:40,299 --> 00:08:43,700 perhaps the most effective ways that they could be supported 141 00:08:43,700 --> 00:08:47,400 over this crisis Lizzy. So tax changes to carry 142 00:08:47,400 --> 00:08:49,300 interest. Another thing that has been kind 143 00:08:49,300 --> 00:08:52,800 of increasingly on the headlines at the moment in your opinion. 144 00:08:52,800 --> 00:08:55,900 Is this kind of again another example of private equity. 145 00:08:56,000 --> 00:08:58,100 Being being reined in or penalized. 146 00:08:58,100 --> 00:09:01,300 And I don't know if we can necessarily say that it is 147 00:09:01,300 --> 00:09:05,200 private Equity, deliberately being targeted. 148 00:09:05,200 --> 00:09:08,500 Because the government sees that there is in fundamentally wrong 149 00:09:08,500 --> 00:09:13,900 with, with peony. What I do think, is true, is 150 00:09:13,900 --> 00:09:20,300 that private Equity is seen as almost an easy, political Target 151 00:09:20,300 --> 00:09:24,500 for the government to, to look to when they're trying to get 152 00:09:24,500 --> 00:09:27,900 their financial position. Isshin back on an even Keel. 153 00:09:29,600 --> 00:09:32,400 If you think back to the government's Manifesto last 154 00:09:32,600 --> 00:09:35,700 Ember which now feels like a very long time ago. 155 00:09:36,300 --> 00:09:40,100 They obviously committed to not raising any of the personal 156 00:09:40,100 --> 00:09:42,500 taxes. So income tax, v18 National 157 00:09:42,500 --> 00:09:45,500 Insurance, they said they're not going to raise. 158 00:09:45,500 --> 00:09:48,600 So you have to have a think about or where is this? 159 00:09:48,700 --> 00:09:51,500 Where is this additional money? Going to come from? 160 00:09:51,500 --> 00:09:54,900 And we know that they need to raise a huge amount of money. 161 00:09:56,100 --> 00:09:59,500 Be able to plug some of the gaps that have been created by covid 162 00:09:59,500 --> 00:10:07,800 and targeting PE will not raise too many eyebrows amongst the 163 00:10:07,800 --> 00:10:12,400 wider. Electorate who he see investors 164 00:10:12,400 --> 00:10:17,200 of sleepy investors in the UK as being you know people with lots 165 00:10:17,200 --> 00:10:22,300 and lots of lots and lots of money Deep Pockets and see them 166 00:10:22,300 --> 00:10:23,700 as being the kind of the quintessential. 167 00:10:23,700 --> 00:10:27,700 Those who have The broader shoulders should bear the 168 00:10:27,700 --> 00:10:29,700 heaviest load. So I think from a government 169 00:10:29,700 --> 00:10:32,300 perspective. They can certainly look to 170 00:10:32,300 --> 00:10:36,700 private Equity to try and raise some of that additional funding. 171 00:10:37,800 --> 00:10:39,800 And then you have to think about what, what does, what does that 172 00:10:39,800 --> 00:10:44,100 look like in practice? We know that the treasury has 173 00:10:44,100 --> 00:10:47,900 announced a review of capital gains tax that's going ahead at 174 00:10:47,900 --> 00:10:56,300 the moment and I think we can genuinely see a case being made 175 00:10:56,300 --> 00:10:59,300 now in treasury by not only back benches. 176 00:10:59,300 --> 00:11:04,800 But but members of the cabinet as well, the capital gains tax 177 00:11:04,800 --> 00:11:07,900 is something that should be reviewed in light of the, the 178 00:11:07,900 --> 00:11:12,800 covid pandemic. So, It's now a question of the 179 00:11:12,800 --> 00:11:16,300 timing rather than whether or not arise and cgt is actually 180 00:11:16,300 --> 00:11:19,600 going to happen. And I think it is inevitable. 181 00:11:19,600 --> 00:11:23,800 The question is just about when the government's going to be 182 00:11:23,800 --> 00:11:28,200 grappling with that question of timing ahead of the budget, 183 00:11:28,200 --> 00:11:30,900 which were expecting probably early. 184 00:11:30,900 --> 00:11:34,600 December this year. Now, the government's obviously 185 00:11:34,600 --> 00:11:39,800 going to want to raise as much tax as possible in the short 186 00:11:39,800 --> 00:11:46,100 term, but So bring in to balance the economy, make sure that, you 187 00:11:46,100 --> 00:11:51,000 know, early stage and nascent growth isn't compromised by by 188 00:11:51,000 --> 00:11:55,000 huge rises in tax. So, you know, the government is, 189 00:11:55,000 --> 00:11:58,800 is walking bit of a tightrope here and that's something that 190 00:11:58,800 --> 00:12:04,000 the treasury is discussing at the moment in terms of the 191 00:12:04,000 --> 00:12:08,200 carried interest point. I think that that speaks to the 192 00:12:08,200 --> 00:12:13,000 same the same wider agenda. Linda it's obviously been sort 193 00:12:13,000 --> 00:12:16,900 of chipped away at at budgets over the last four to five or 194 00:12:16,900 --> 00:12:21,300 six years and the government will be looking at whether there 195 00:12:21,300 --> 00:12:25,400 is any more room for manoeuvre in terms of carry, potentially 196 00:12:25,400 --> 00:12:28,700 bring it in line with with income tax. 197 00:12:28,900 --> 00:12:32,500 Potentially bringing it up. Not quite that high, but making 198 00:12:32,500 --> 00:12:36,500 quite a shift up to the sort of the mid 30 percent. 199 00:12:36,800 --> 00:12:40,200 So potentially an easy win for the government. 200 00:12:40,900 --> 00:12:45,300 Whether they understand all the ramifications on private equity 201 00:12:45,400 --> 00:12:49,100 and businesses that private Equity supports in the UK. 202 00:12:49,400 --> 00:12:51,600 I think that's probably a question for another day. 203 00:12:52,400 --> 00:12:53,700 Great. Thanks, Lizzy. 204 00:12:53,900 --> 00:12:58,100 It's not so much a matter of if, but when they will carry out 205 00:12:58,200 --> 00:13:02,400 this tax hike then. Yes, I think that and Dad, I 206 00:13:02,408 --> 00:13:05,800 just wanted to come over to you because your area of expertise 207 00:13:05,900 --> 00:13:07,900 really lies with the future fund. 208 00:13:07,900 --> 00:13:10,500 That was announced. Could you talk us through? 209 00:13:10,800 --> 00:13:14,800 What this was when it came about and how it how it operates. 210 00:13:17,000 --> 00:13:26,100 Sure, so early on in the covid pandemic there was the there 211 00:13:26,100 --> 00:13:32,600 were clear signs that was class growth loss-making early stage 212 00:13:32,600 --> 00:13:36,300 to growth stage. Businesses were missing are all 213 00:13:36,300 --> 00:13:38,500 the measures that have been made available to other SME 214 00:13:38,500 --> 00:13:44,800 businesses and there was clearly a need for some supports for 215 00:13:44,800 --> 00:13:46,400 that particular segment of the economy. 216 00:13:47,200 --> 00:13:53,600 Tiffany, UK wanted to keep growing, its its technology 217 00:13:54,300 --> 00:13:57,500 capabilities, and to support the businesses that they were 218 00:13:57,500 --> 00:13:59,800 thriving in the UK prior to the pandemic. 219 00:14:00,200 --> 00:14:05,300 So, there were various Lobby groups who were requesting the 220 00:14:05,300 --> 00:14:10,000 government, didn't Place schemes to support that particular 221 00:14:10,000 --> 00:14:14,900 seconds, and ultimately the Future Farmers was announced in 222 00:14:14,900 --> 00:14:18,400 early, May and Orchard. In the middle of names. 223 00:14:20,100 --> 00:14:24,300 And although there were there were quite a few people who were 224 00:14:24,400 --> 00:14:29,200 concerned about he would be included or excluded as a result 225 00:14:29,200 --> 00:14:34,000 of the eligibility requirements. Generally, speaking and Market, 226 00:14:34,000 --> 00:14:37,900 participants have been happy with the way that the future 227 00:14:37,900 --> 00:14:43,900 fund has worked in practice. And again, it was rushed through 228 00:14:43,900 --> 00:14:47,700 quite quickly. So there were Some TV problems. 229 00:14:47,700 --> 00:14:51,600 Generally, speaking things of progressed quite nicely 230 00:14:51,600 --> 00:14:56,100 applications and now moving fairly swiftly. 231 00:14:56,100 --> 00:15:00,100 So new applicant now will normally find out whether they 232 00:15:00,100 --> 00:15:03,500 are successful within it roughly three weeks and they could be 233 00:15:03,500 --> 00:15:07,100 funded within a month or five weeks of their mission 234 00:15:07,100 --> 00:15:11,600 application. So there were early stage 235 00:15:11,600 --> 00:15:14,300 bottlenecks, but generally speaking things have gone. 236 00:15:14,300 --> 00:15:19,800 Well initially, it was supposed to It's 250 million pound funds, 237 00:15:20,100 --> 00:15:24,400 but that amount was exceeded even on the first day of 238 00:15:24,400 --> 00:15:28,700 applications and it's so far. The government's LED 239 00:15:28,700 --> 00:15:33,200 significantly more than 250 and it will continue to do so. 240 00:15:33,200 --> 00:15:36,500 And the chancellor has publicly declared the fact that he will 241 00:15:36,500 --> 00:15:43,300 provide funds for for as long as the applications come in and 242 00:15:43,300 --> 00:15:46,700 companies are eligible until the end of September. 243 00:15:46,800 --> 00:15:49,900 Remember when the fund is supposed to end, they'll be 244 00:15:49,900 --> 00:15:53,100 funds available. If, if applications are made 245 00:15:53,100 --> 00:15:57,600 that, that are successful. Thanks a lot done. 246 00:15:57,600 --> 00:16:01,600 And I know that the BBC, a kind of criticized it at first for 247 00:16:01,900 --> 00:16:05,500 excluding some businesses, those challenges. 248 00:16:05,500 --> 00:16:07,900 Would you say if they have they've been have been, they've 249 00:16:07,900 --> 00:16:12,300 been solved or. Yeah, so so some of the main 250 00:16:12,300 --> 00:16:18,000 criticisms and concerns of be BBC, a and coalition's digital 251 00:16:18,000 --> 00:16:20,800 economy. Codec, another leading industry 252 00:16:20,800 --> 00:16:25,100 group were around. The fact that he is an SEC is 253 00:16:25,400 --> 00:16:27,600 investigating. These were not able to put money 254 00:16:27,600 --> 00:16:29,600 in an onside, the government to access the scheme. 255 00:16:31,400 --> 00:16:37,600 And the main reason for that was State a driven, which is also 256 00:16:37,600 --> 00:16:44,700 the main reason why symbols and the, and the coronavirus loans 257 00:16:44,700 --> 00:16:48,200 that Lizzie were talking about earlier and not available to 258 00:16:48,200 --> 00:16:52,900 loss-making businesses. So the state aid rules are quite 259 00:16:52,900 --> 00:16:58,000 rigid in that regard. And It was, it was determined 260 00:16:58,000 --> 00:17:01,400 that in order to get this scheme through as quickly as possible 261 00:17:01,400 --> 00:17:05,900 and available to as many companies as possible before it 262 00:17:05,900 --> 00:17:10,300 was too late. And then that unfortunately 263 00:17:10,300 --> 00:17:14,300 those businesses and those investors had to be excluded 264 00:17:15,200 --> 00:17:20,000 from from the scheme. So, yes that that that was 265 00:17:20,000 --> 00:17:23,599 initially a big concern in industry and there are still 266 00:17:24,099 --> 00:17:28,500 lots of people who are upset. $2 and dissatisfied by that, but 267 00:17:29,500 --> 00:17:33,500 other than very early stage businesses who are heavily 268 00:17:33,500 --> 00:17:35,300 reliant on those type of investors. 269 00:17:35,500 --> 00:17:40,900 Who generally speaking later stage businesses have not 270 00:17:40,900 --> 00:17:45,000 necessarily been impacted by the fact that, you know, smses 271 00:17:45,000 --> 00:17:48,500 investors camera kind of constitute much invested for the 272 00:17:48,500 --> 00:17:53,300 purpose of the funds. And also we assisted numerous 273 00:17:53,300 --> 00:17:58,600 early stage businesses who have Just decided that they are able 274 00:17:58,900 --> 00:18:02,900 to access funds from investors who are willing not to take. 275 00:18:02,900 --> 00:18:06,400 The is an SEO is treatments in respect of their actual 276 00:18:06,400 --> 00:18:12,200 Investments. And any are there, there were on 277 00:18:12,200 --> 00:18:16,400 the other side of the coin. People arguing that That's, you 278 00:18:16,400 --> 00:18:21,000 know, providing providing government incentives to invest. 279 00:18:21,000 --> 00:18:26,200 He's to match, the government's funding and the future fund also 280 00:18:26,200 --> 00:18:30,400 was was kind of counterintuitive and who was basically the 281 00:18:30,400 --> 00:18:34,700 government matching government. So there are also people are 282 00:18:34,700 --> 00:18:38,600 doing along those lines. Yeah, really interesting. 283 00:18:38,600 --> 00:18:41,000 Thanks, Dan. And just on that soon. 284 00:18:41,100 --> 00:18:44,300 So, some sport support offered via the future fund is quite a 285 00:18:44,308 --> 00:18:47,600 lot of generous than funds offered via Sybil, are they 286 00:18:47,600 --> 00:18:51,000 there for missing out on? Capital are really vital time in 287 00:18:51,000 --> 00:18:54,800 their development and considering this will the future 288 00:18:54,800 --> 00:18:58,200 fund remain an attractive option for fast growth and startup. 289 00:18:58,200 --> 00:19:00,800 Companies seeking to increase runways and survive the 290 00:19:00,800 --> 00:19:02,800 pandemic. Yesterday. 291 00:19:03,500 --> 00:19:05,800 That's interesting question because I don't think the future 292 00:19:05,800 --> 00:19:10,300 find this tool. Generous than Sybil's in Sybil's 293 00:19:10,300 --> 00:19:13,800 for small to medium businesses, goes up to 5 million pounds. 294 00:19:14,000 --> 00:19:17,300 And so, does the future fund. If he tries very different in 295 00:19:17,300 --> 00:19:19,000 that. It's a, it's a matched Equity 296 00:19:19,000 --> 00:19:20,500 investment. It's the first time. 297 00:19:20,500 --> 00:19:24,500 The government's taking direct investments in, in UK startups 298 00:19:24,800 --> 00:19:29,000 and the whole nature of the future fund is that, you know, 299 00:19:29,000 --> 00:19:34,400 the government is willing to put Equity alongside industry 300 00:19:34,400 --> 00:19:37,900 participants. So if an independent, Pendants 301 00:19:37,900 --> 00:19:40,700 investor is willing to put money into a business and the 302 00:19:40,708 --> 00:19:44,500 government is relying on on their judgment and their due 303 00:19:44,500 --> 00:19:47,500 diligence in order to put money alongside them. 304 00:19:49,200 --> 00:19:53,000 But the actual Universe, the size of the funnels is purely 305 00:19:53,000 --> 00:19:56,100 dependent on what the match investor is willing to put in. 306 00:19:56,100 --> 00:19:58,700 So for match investors willing to put in five million pounds, 307 00:19:59,100 --> 00:20:01,600 then the government will also put involvement in powers and 308 00:20:01,600 --> 00:20:05,900 there's no subjective test as regards to stay to business of 309 00:20:06,000 --> 00:20:09,100 literally. The government will just match 310 00:20:09,100 --> 00:20:12,300 exactly what the investors will invest is willing to do. 311 00:20:13,100 --> 00:20:16,800 So, I then I don't think that it's necessarily right to 312 00:20:16,800 --> 00:20:19,900 categorize future, binders, less generous, turn signals. 313 00:20:21,900 --> 00:20:25,000 Yeah, sure and and Lizzy kind of like, what was your take on? 314 00:20:25,000 --> 00:20:27,700 This would you would you agree with was down on that? 315 00:20:29,000 --> 00:20:31,200 Now, I think so. I mean, I think, what's been 316 00:20:31,200 --> 00:20:34,500 interesting about the future fund, which was obviously set 317 00:20:34,500 --> 00:20:37,800 out slightly later than some of the initial business support 318 00:20:37,800 --> 00:20:40,300 schemes. Was that the government was was 319 00:20:40,300 --> 00:20:43,000 very much in listening mode around which parts of the 320 00:20:43,008 --> 00:20:44,300 economy really needed that support. 321 00:20:44,300 --> 00:20:52,300 And, you know, quite a concerted lobbying effort was was brought 322 00:20:52,300 --> 00:20:56,600 about by these very early stage startups, and the government 323 00:20:56,600 --> 00:20:59,500 responded to that. So I think it goes to show Over 324 00:20:59,500 --> 00:21:03,700 the course of the pandemic government has been a Mina ball 325 00:21:03,700 --> 00:21:07,300 to stepping in and intervening and putting in place schemes 326 00:21:07,300 --> 00:21:11,700 that are genuinely saw as being necessary to support all the 327 00:21:11,700 --> 00:21:15,600 different types of businesses in the UK economy. 328 00:21:16,900 --> 00:21:21,000 Yeah, definitely. And I guess sorry. 329 00:21:21,000 --> 00:21:23,900 No, go ahead, done. Alright, hope or all. 330 00:21:23,900 --> 00:21:25,800 I was going to say, is one thing that people don't necessarily 331 00:21:25,800 --> 00:21:30,200 realize all the gods speech and as well as that the businesses 332 00:21:30,200 --> 00:21:35,600 that the it's supporting of range massively from companies 333 00:21:35,600 --> 00:21:39,700 that are only weighs 250 K, previously, all the way up to 334 00:21:40,100 --> 00:21:43,800 potentially unicorns as well. And lots of late stage companies 335 00:21:43,800 --> 00:21:47,300 are also taking advantage of the future and say, it's For to the 336 00:21:47,300 --> 00:21:52,300 very kind of diverse range of companies across the economy. 337 00:21:53,200 --> 00:21:55,900 Yeah, and on that. I was just going to say to both 338 00:21:55,900 --> 00:21:58,000 of you. How do you think that the UK 339 00:21:58,000 --> 00:22:02,800 loans have compared to some of the state state bailout loans in 340 00:22:02,800 --> 00:22:09,700 Europe or the rest of the world? From my perspective. 341 00:22:10,100 --> 00:22:13,900 I think the general consensus has been that the UK bailout 342 00:22:13,900 --> 00:22:15,500 schemes have been incredibly generous. 343 00:22:15,500 --> 00:22:20,000 I think more so than a lot of businesses were anticipating 344 00:22:20,100 --> 00:22:22,200 when the coronavirus pandemic hit. 345 00:22:22,200 --> 00:22:28,300 I think you know, the government has taken a view that they will 346 00:22:28,300 --> 00:22:32,000 do anything. That is required be that pumping 347 00:22:32,000 --> 00:22:35,600 in huge huge and you know, unprecedented amounts of money 348 00:22:35,600 --> 00:22:38,600 into the economy. Make sure that the businesses 349 00:22:38,600 --> 00:22:42,200 can come out of this in one piece. 350 00:22:42,200 --> 00:22:45,400 I think the bigger question now is, how does the government 351 00:22:45,400 --> 00:22:49,800 start unpicking that? So we don't see a massive uptick 352 00:22:49,800 --> 00:22:56,100 in unemployment, massive uptick in businesses becoming insolvent 353 00:22:56,400 --> 00:23:00,000 because I think a lot of parts of the economy have got to some 354 00:23:00,000 --> 00:23:03,600 extent dependent on on this public sector support. 355 00:23:03,600 --> 00:23:06,400 So yes, I think the government has been very, very generous. 356 00:23:06,500 --> 00:23:09,800 Generous, whether they have made a rod for their own back. 357 00:23:09,800 --> 00:23:11,700 In terms of what happens. Next. 358 00:23:11,700 --> 00:23:15,400 I think is the big question that now needs to be addressed. 359 00:23:16,800 --> 00:23:19,900 Yeah, and II agree with that entirely dizzy. 360 00:23:19,900 --> 00:23:23,800 I think if you compare the app the equity back schemes to 361 00:23:23,800 --> 00:23:26,500 what's being introduced across Europe, I think, you know, we 362 00:23:26,500 --> 00:23:28,900 really have led the way typically in terms of the size 363 00:23:28,900 --> 00:23:31,600 of the funding that's available the France. 364 00:23:31,600 --> 00:23:37,500 Germany and Spain have similar schemes, but The way it's been 365 00:23:37,500 --> 00:23:42,300 implemented in the UK to take up in the market has been has been 366 00:23:42,300 --> 00:23:48,500 quite radical and extremely well, received by most of the 367 00:23:48,500 --> 00:23:50,000 market. Participants, as I mentioned 368 00:23:50,400 --> 00:23:51,900 earlier. Obviously, there are companies 369 00:23:51,900 --> 00:23:57,400 that are excluded and, you know, I should mention is not just, he 370 00:23:57,400 --> 00:24:02,900 is, and SE is match investors. That have kind of caused 371 00:24:03,000 --> 00:24:06,400 concern. It's also a relation to for 372 00:24:06,500 --> 00:24:09,600 Example, the fact that you have to, you have to have raised 373 00:24:09,900 --> 00:24:14,800 equity and actually issued shares worth at least 250,000 374 00:24:15,400 --> 00:24:23,000 pounds prior to prior to receiving the future funds loan 375 00:24:23,600 --> 00:24:26,500 and lots of companies raise money, by way of convertible low 376 00:24:26,500 --> 00:24:29,400 notes. So there were some, there was 377 00:24:29,400 --> 00:24:32,600 some businesses who have had successful fundraisers in the 378 00:24:32,600 --> 00:24:35,800 past are in desperate need of whole extensions. 379 00:24:35,800 --> 00:24:39,500 That Runway Currently but are excluded because of the way that 380 00:24:39,500 --> 00:24:41,100 the funds has been structured be set up. 381 00:24:41,400 --> 00:24:46,000 So, you know, there are people who are who are disappointed and 382 00:24:46,100 --> 00:24:51,900 who could have desperately desperately benefited from the 383 00:24:51,900 --> 00:24:56,300 future fund but on the whole I think they were the reception 384 00:24:56,300 --> 00:25:00,100 has been very positive. Yeah, that's really interesting 385 00:25:00,100 --> 00:25:02,500 because obviously there's as I mentioned before there's been 386 00:25:02,500 --> 00:25:06,300 this kind of debate around whether or not. 387 00:25:06,300 --> 00:25:10,100 The government was kind of purposely trying to prevent P 388 00:25:10,100 --> 00:25:15,100 back businesses from accessing financial aid, but you don't you 389 00:25:15,100 --> 00:25:21,100 don't think that all done? Yeah, I don't I don't think the 390 00:25:21,100 --> 00:25:25,700 government has purposely as purse purposely sought to 391 00:25:25,700 --> 00:25:28,300 exclude private Equity from these from these measures are 392 00:25:28,308 --> 00:25:34,600 serving some. Some of the measures may not may 393 00:25:34,600 --> 00:25:39,200 not be applicable due to some of the state eight requirements and 394 00:25:39,200 --> 00:25:42,200 connection over. And I think actually lots of are 395 00:25:42,200 --> 00:25:44,800 probably lots of our probability class of little things with 396 00:25:44,800 --> 00:25:48,100 differently. It's a here, even if If they and 397 00:25:48,100 --> 00:25:50,300 their portfolio, companies could technically ask them some of 398 00:25:50,308 --> 00:25:53,100 these funds. They've taken a more holistic 399 00:25:53,100 --> 00:25:56,400 view asked in what is arriving to do. 400 00:25:56,400 --> 00:26:00,900 Even if we can technically access, these funds should be 401 00:26:00,900 --> 00:26:04,900 accessing These funds. And generally, speaking of a lot 402 00:26:04,900 --> 00:26:08,100 of Reproductive Rights of decided that in their happy for 403 00:26:08,100 --> 00:26:13,100 their businesses to access furlough, in order to ensure 404 00:26:13,400 --> 00:26:17,600 people's job, security, Etc, and death Tax. 405 00:26:17,800 --> 00:26:21,600 But generally speaking. We've had a lot of clients who 406 00:26:22,300 --> 00:26:25,900 decided that it was not in the best interest for them or their 407 00:26:25,900 --> 00:26:30,400 companies to access the sibyl's and other another loans have 408 00:26:30,400 --> 00:26:32,700 been made available. Yeah, and I think it's really 409 00:26:32,700 --> 00:26:35,000 interesting. Kind of what was available. 410 00:26:35,400 --> 00:26:38,600 What was available today. And what was available during 411 00:26:38,600 --> 00:26:42,800 the 2008 financial crash. That's pretty interesting. 412 00:26:43,700 --> 00:26:46,800 I just wanted to kind of turn now and look at some of the The 413 00:26:46,808 --> 00:26:50,000 Wider implications of government-backed dadon, the p + 414 00:26:50,000 --> 00:26:53,800 VC Community, kind of going into the future and you touched on it 415 00:26:53,800 --> 00:26:58,100 before busy but kind of how will the government and the finance 416 00:26:58,100 --> 00:27:00,900 sector kind of work together to help deal with the amount of 417 00:27:01,000 --> 00:27:04,400 incoming bad debt accumulated by businesses. 418 00:27:06,200 --> 00:27:10,200 Yeah, I think the longer-term implications for particularly 419 00:27:10,200 --> 00:27:14,600 for the PE Community is really, really interesting. 420 00:27:14,600 --> 00:27:20,500 And I think we will see a very different approach to that part 421 00:27:20,500 --> 00:27:22,500 of the economy from the government. 422 00:27:22,500 --> 00:27:25,900 And I think that's already starting to come through. 423 00:27:26,900 --> 00:27:32,300 If we look at what was included in the requirements around the 424 00:27:32,300 --> 00:27:35,100 CL bills scheme, which was obviously introduced like, You 425 00:27:35,100 --> 00:27:39,300 later for some of this slightly larger, mid-market companies. 426 00:27:39,300 --> 00:27:42,500 I think that tells us quite a lot about how the government is 427 00:27:42,600 --> 00:27:46,200 intending to behave towards companies that have drawn down 428 00:27:46,200 --> 00:27:49,200 on some of the business support that's been made available. 429 00:27:50,800 --> 00:27:54,400 I think the main take out from my perspective, is, there's a 430 00:27:54,408 --> 00:27:58,700 sort of inherent quid pro quo, that's been embedded in the 431 00:27:58,700 --> 00:28:03,800 terms of some of the loans. So, most notably, for example 432 00:28:03,800 --> 00:28:07,100 car, some of the companies that are drawing down very large 433 00:28:07,100 --> 00:28:10,900 amount of money. So over 50 million from the CL, 434 00:28:10,900 --> 00:28:13,500 Bill scheme are going to be subject to a number of 435 00:28:13,508 --> 00:28:18,400 restrictions on things, like dividend payments, senior pay 436 00:28:18,500 --> 00:28:21,000 share BuyBacks those sorts of Things. 437 00:28:22,900 --> 00:28:28,600 And I think that is quite an interesting interjection from a 438 00:28:28,600 --> 00:28:32,500 government in terms of how they want to see this money being 439 00:28:32,500 --> 00:28:36,200 spent in the very early days of the pandemic. 440 00:28:36,200 --> 00:28:39,500 I think a lot of the money was being sort of handed out hand 441 00:28:39,500 --> 00:28:43,700 over fist as almost a government freebie to say, look, we've got 442 00:28:43,700 --> 00:28:45,500 this money. We want to help, we want to 443 00:28:45,500 --> 00:28:48,200 shore up the economy, do with it. 444 00:28:48,200 --> 00:28:50,400 What you will to try and get your business up. 445 00:28:50,500 --> 00:28:54,000 At the other end of this. And is the pandemic has 446 00:28:54,000 --> 00:28:57,100 progressed in the business support schemes have become 447 00:28:57,500 --> 00:29:02,100 slightly more slightly more sophisticated. 448 00:29:02,200 --> 00:29:04,900 The government has been embedding some of these 449 00:29:04,900 --> 00:29:09,400 requirements into the very nature of the schemes, to make 450 00:29:09,400 --> 00:29:12,800 sure that they almost get something back, which I think is 451 00:29:12,800 --> 00:29:15,900 really, really important. So I think we can definitely 452 00:29:15,900 --> 00:29:19,500 anticipate that, there will be almost a sort of corporate 453 00:29:19,500 --> 00:29:23,100 Reckoning coming out. The other end of this crisis and 454 00:29:23,108 --> 00:29:26,900 we're already starting to see that where businesses will be 455 00:29:26,900 --> 00:29:31,800 will be judged on what they have spent business support loans on 456 00:29:32,300 --> 00:29:35,900 how they've behaved towards customers and their staff. 457 00:29:35,900 --> 00:29:40,700 In terms of, in terms of the furlough and essentially whether 458 00:29:40,700 --> 00:29:45,300 they're seemed to have had a good crisis and those that are 459 00:29:45,300 --> 00:29:50,300 deemed to have not behaved. Well, I think will will face a 460 00:29:50,308 --> 00:29:53,800 bit of a reckoning in the Cho. Yeah, that's, that's really 461 00:29:53,800 --> 00:29:54,900 interesting. Lazy eye. 462 00:29:55,100 --> 00:29:58,100 And I think we're definitely already seeing some of those 463 00:29:58,100 --> 00:30:02,600 businesses already kind of Quinta Keen to show that they've 464 00:30:02,600 --> 00:30:05,200 sort of had a good crisis. Like you said. 465 00:30:05,500 --> 00:30:08,300 And Dan did you, did you have any thoughts on this at all? 466 00:30:08,300 --> 00:30:11,900 Do you think the, yeah, what's quite interesting on the, on the 467 00:30:11,900 --> 00:30:16,600 future fund side is that the government, as I said, is only 468 00:30:16,600 --> 00:30:19,500 putting money where private investors are willing to put 469 00:30:19,500 --> 00:30:22,300 money. So, so, It's a bit different in 470 00:30:22,300 --> 00:30:25,200 that regard and the government's obviously hoping that businesses 471 00:30:25,200 --> 00:30:30,500 are going to perform well and generate a return for them in 472 00:30:30,508 --> 00:30:33,500 the future. And actually the eligibility 473 00:30:33,500 --> 00:30:36,900 requirements in a have have have changed a bit since it was 474 00:30:36,900 --> 00:30:40,000 initially launched, but one of the eligible eligibility 475 00:30:40,000 --> 00:30:42,900 requirements makes it open to more participants. 476 00:30:42,900 --> 00:30:47,600 That includes the fact that you no longer can only access this 477 00:30:47,600 --> 00:30:51,100 if you have a UK Top Co, you can also access it as well, if you 478 00:30:51,100 --> 00:30:54,500 have the U.s. Topo and I've been a member of a 479 00:30:54,508 --> 00:30:55,700 u.s. Accelerator. 480 00:30:56,500 --> 00:31:01,300 So in fact, they've kind of widens the applicability to a 481 00:31:01,308 --> 00:31:05,500 certain extent as well. And they also they also enabled 482 00:31:06,000 --> 00:31:10,100 Founders to do invest alongside the government as well when that 483 00:31:10,100 --> 00:31:14,100 wasn't clear in the first place. So I think the future fund is a 484 00:31:14,108 --> 00:31:19,200 bit different to to the loans where by the government's hoping 485 00:31:19,200 --> 00:31:20,300 people. Can, we pay them? 486 00:31:20,300 --> 00:31:24,500 But ultimately the man Not be able to move the future funds 487 00:31:24,700 --> 00:31:28,400 that they're making Equity Investments and hoping that 488 00:31:28,400 --> 00:31:33,600 these companies will ultimately come through the coronavirus 489 00:31:33,600 --> 00:31:38,800 pandemic and and and be winners. And and in fact, a lot of the 490 00:31:38,800 --> 00:31:42,700 businesses that are being supported our technology, enable 491 00:31:42,700 --> 00:31:47,800 businesses who are very well placed, you would hope to come 492 00:31:47,800 --> 00:31:51,200 out fighting from this from this pandemic. 493 00:31:51,500 --> 00:31:54,800 Digital transition is extremely important to the economy and 494 00:31:54,800 --> 00:31:57,600 these leaders at the top companies that you could argue. 495 00:31:57,600 --> 00:31:59,100 The government should be backing. 496 00:31:59,400 --> 00:32:02,300 And actually, from a taxpayer perspective. 497 00:32:02,400 --> 00:32:05,300 The fact that independent investors are willing to put 498 00:32:05,300 --> 00:32:07,500 their money alongside the government, support his business 499 00:32:07,500 --> 00:32:09,500 as well. Should be seen, as very positive 500 00:32:09,500 --> 00:32:13,000 thing because the government's not just putting money into a 501 00:32:13,000 --> 00:32:17,900 business that may have otherwise fail because their shareholders 502 00:32:17,900 --> 00:32:22,600 decided to abandon. - e and I think it would be. 503 00:32:22,600 --> 00:32:24,200 It would be really interesting because of have this 504 00:32:24,200 --> 00:32:28,300 conversation, a few months from now or a year from now and see 505 00:32:28,500 --> 00:32:32,400 what shape everyone's in. Excellent Lizzie Dan. 506 00:32:32,400 --> 00:32:33,800 It was a pleasure to speak with you. 507 00:32:33,800 --> 00:32:36,700 Thank you so much for your insights and thank you for 508 00:32:36,700 --> 00:32:37,200 listening.