Almost a year ago, Innovate UK formally announced the launch of the £50m innovation loans pilot programme at Innovate 2017 in Birmingham. Since October 2017, I have been travelling the length and breadth of the UK with colleagues from Innovate UK, the Knowledge Transfer Network and the Enterprise Europe Network to let businesses know about this new programme. Here are a few reflections on the past year’s activities.
The inputs - briefing businesses around the UK
- 37 briefing events, with 5 simultaneous and recorded online webinars, each lasting about 3 hours, with presentations ranging from about 50 slides to as many as 170 (including the appendices with all the ‘gory details’);
- 18 cities across the UK: Ansty, Bath, Belfast, Birmingham, Bristol, Cambridge, Cardiff, Darlington, Daresbury, Doncaster, Glasgow, Leeds, Liverpool, London, Manchester, Newcastle, Nottingham and Rotherham.
- 64 speakers (including regulars Scott O’Brien, Cat Dilloway, Andy Wade and Josh Sheppard from the innovation loans team and Ian Tracey, Charlotte Thompson, Mairi Dillon, Emma Fadlon and Kezia Williamson from the KTN Access to Funding & Finance team – not forgetting Poonam Phull organising the events and Ash Hooper managing the webinars).
- 1,500+ participants including businesses, advisors, supporters and assessors. (Not counting those who registered for events but failed to show up, but including those who came along and left after the break, having decided they’d heard all they needed.)
The outputs - raising awareness of innovation loans
Outputs so far, our 5th competition is still open for applications until 21st November (registration closes 14th November)
In our recent overall Innovate UK customer survey, 48% of respondents told us that they had heard of innovation loans – so we think that we have been doing something right in raising awareness of a new offer that relates specifically to SMEs carrying out later stage R&D with a clear route to commercial success.
- 2116 people registered to receive application forms
- 277 businesses have submitted applications
- 229 applications (eligible and in scope) have been through innovation assessment and initial credit evaluation
- 38 conditional loan offers have been made, committing £26m in capital (with an average loan amount of c£700k, a typical loan term of 7 years, an average of 72% of project costs funded by the loan – and an average innovation score of 78%). 12 loan-funded projects have commenced.
- 89 proposals are still in process, having progressed to detailed credit analysis, documentation or meeting loan offer conditions.
The shift to scale and growth
The agenda has changed: we have listened (or at least noticed eyes glazing over during presentations) and shifted our briefing events. We have gone from reading out the instructions to discussing (including with local experts) where innovation loans might fit into the funding strategies of SMEs who are seeking to scale and grow through innovation.
We try to encourage these SMEs to have a funding strategy that complements their technology development strategy and their go-to-market strategy.
We have fewer skeptics at the events: there has been a noticeable shift from fear of losing access to free money to ambition for scale and growth.
People are getting it: telling the story repeatedly (at briefing events, in webinars, in blogs, on panels, on social media, through targeted digital advertising, answering several hundred questions routed through our Customer Support Services team, in podcasts and through networking) has shifted the main question from how does it work? to do our objectives align?.
Quantity and quality: we are still filling rooms (with over 90 people at the last London briefing); and even when the crowd seems quite sparse (as in Cardiff and Edinburgh recently) the business leaders that have come along have been really engaged and relevant.
(there’s always a but!)
Our applicants are still largely early stage, micro and small businesses, with few more established medium sized enterprises. Many applicants are still under-capitalised, needing more equity investment. Overall more startups are applying than scale-ups.
We still get too many incomplete applications (down from 20% but still around 10%).
Too many applications have to be declined because they are of quite low quality (innovation and credit) or appear not to have listened to the story or read the instructions. (Please read the guidance and contact our Customer Support Services team if anything is unclear!)
Innovation loans are making a difference
With the 5th scheduled competition live, for the first time in over a year I don’t have any briefing events (currently) in my diary. Instead, I am now touring science parks and industrial estates around the UK with my fellow credit committee members (Scott O’Brien and Tim Sawyer, our Chief Investment Officer) as we have presentations from the management teams of businesses to whom we have offered loans.
It’s great to hear how they plan to grow and how an innovation loan will make the difference for them. (And they can laugh as I put on a pink hi-vis jacket or full cleanroom gear instead of smiling politely at my lame jokes in briefing events.)
Our interim evaluation, being carried out by SQW, will gather robust evidence around demand, process capability and initial leading indicators of economic growth and credit quality. In the meantime, we are getting anecdotes to suggest that there is a real place for innovation loans to complement grants, equity and commercial debt funding and that they make a difference.
We are seeing our borrowers raising additional capital to fund their growth ambitions. We are seeing examples of business leaders making the transition from technologist to chief executive – and generously sharing their insights, hints and tips at briefing events. And we are seeing proper grown up business behaviours as our borrowers focus on delivery of customer-led innovation repeatably, reliably and at scale.
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