+44 (0)1509 261182

ISCF Commercialising Quantum Technologies Investment Accelerator

Overview:

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

Innovate UK, as part of UK Research and Innovation, is inviting UK registered investors to partner with us. Together they will distribute a share of up to £12million in grants to micro, small or medium-sized enterprises (SMEs) 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 quantum technologies, including products, services and business models. This is phase 1 of a two-phase competition. The second phase will be open to SMEs to apply for funding.

The investor partners selected will work over a two-year timeframe after funding is awarded (approximately March 2020 to March 2022) to:

  • Identify innovative SMEs developing or exploiting quantum technologies that are suitable for investment but outside your typical risk preference, which might involve changing your target market
  • Help those SMEs deliver a quantum technologies project, with 50% of the total eligible project costs grant funded and the remaining 50% from equity investment into the business

Over a further two years the investor partner will manage any remaining grant deployment to ongoing projects.

Innovate UK 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 quantum technology market. Investor partners must provide wider business skills, networks and experience as well as capital investment.

Open Date:

19/08/2019

Close Date:

25/09/2019

The aim of this competition is to encourage early private investment in innovative second-generation quantum 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 quantum technologies 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 related to quantum technologies 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 quantum technologies 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 funded companies
  • Syndicate with other investors if applicable
  • Report on the performance and progress of 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, Innovate UK are looking to select a portfolio of investor partners working across the specific themes for this competition and to ensure value for money.

For phase 2, in partnership with successful investor applicants, Innovate UK 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. Innovate UK will select a shortlist to invite to interview. Innovate UK 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 and 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 Innovate UK may seek permission to speak with your portfolio companies.

Innovate UK will retain 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 from early 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 for confidentiality and information security.

SME projects funded through this programme must exploit second generation quantum techniques. These are defined as the generation or clear control and manipulation of quantum states, resulting in superposition and entanglement (single photon generation or detection and quantum computing are in scope).

Projects must address at least one or more of the following second-generation technologies:

  1. Connectivity: techniques for securing data in storage and in flight.
  2. Situational awareness: this includes autonomous systems, sensors and detectors for the built environment, transport and infrastructure, and imaging and sensing to “see things currently invisible”.
  3. Computing: transformational computers for solving currently intractable problems.

Phase 1: investor partners

In this competition Innovate UK 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 £2million and £12million. In order to balance the portfolio of investor partners and ensure best value for money, Innovate UK’s offer might be different from the amount you applied for. Your application must outline the minimum amount of grant you would be prepared to operate with, and the maximum you feel you could effectively allocate.

You must be able to demonstrate that:

  • Between 2020 and 2024 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 three times the grant amount to successful micro, small or medium-sized enterprises (SMEs) by March 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

Innovate UK 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

Innovate UK will decide which investors to appoint as partners. Their 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 who wish to carry out an innovative research and development (R&D) project in the quantum technologies 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 two years. Projects must end and the full grant allocation must be deployed by March 2024.

Innovate UK will finalise the total eligible project costs (including grant and investment) in discussion with successful investor applicants. Innovate UK expect projects will have total eligible costs of between £250,000 and £2million.

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.

Innovate UK expect to run more than one round of the SME competition.

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.

Up to £12million 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, Innovate UK are looking to select up to three investors to partner with. 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.

Innovate UK 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 competitions 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 ensure that their organisation is eligible for state aid.

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

  • Are purely at the technical proof of concept stage, with the exception being for a single, short milestone that may be required to reach a 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

Cresco Innovation works with companies to develop and implement innovation strategies. We help client companies identify opportunities to develop new products and services, and then create a package of support to ensure that the idea is turned into a commercial reality.

Our services include securing grants (as a team we have raised around £40million over three years), business planning, IP advice, access to finance and funders, project management and IP commercialisation support.

We regularly act as the interface with the funding bodies and help clients ensure that their projects are properly managed to ensure the best outcome for all.

Call to find out more

If you’d like to know more about this competition, please give us a call on 01509 261182 and one of our team will be delighted to help you access this funding opportunity for your business.