£1.25bn for VC-backed startups — Dawn’s response to the UK government’s coronavirus plan

Haakon Overli
Dawn Capital
Published in
2 min readApr 20, 2020


The UK government pledged this morning to invest £1.25bn in high-growth companies — a bailout for VC-backed businesses struggling to survive through the coronavirus lockdown. Here’s the FT’s coverage. The co-investment fund will see private sector money matched with state-backed loans that can convert into equity stakes.

At Dawn, we welcome this support. We see this not only as a support for exciting individual tech businesses but as a wise investment in the future of UK Tech.

By their nature, venture-backed businesses do not hoard cash. They are built to run close to the wire and funnel their limited cash into building the future. Therefore, a once-in-a-lifetime shock where customers freeze spend and less cash is coming in is going to put many of these businesses at real risk.

The main levers startup CEOs have in mitigating this economic shock is to make substantial layoffs and retrench, combined with raising funds in a very tough fundraising market. Although this is a viable but regrettable route for each individual company, taking UK startups collectively, this massive retrenchment would set back our tech industry substantially as an entire generation of companies stall, and fired employees drift out of the tech industry.

We see two scenarios for UK tech: watch these companies shrink, hunker down and ride it out and get to the same point years later, or provide more capital for startups, with which they can, albeit more prudently, keep investing in the UK’s future. It is this second option that the government has, in our view very wisely, opted for. By making more capital available as co-investment, it provides a multiplier to the capital VCs invest.

At the same time, by structuring it as a co-investment scheme, the government is making sure that public money is only being spent on the better businesses, the ones VCs want to double down on in this tough investment environment. The result for startups is that when the current spend paralysis eases and more normal conditions return — remembering that many startups fare well in recessions due to their strong ROI natures — the core value of the businesses is preserved.

In short, we thoroughly welcome having capital available for these world leading innovative businesses to get through this Covid shock — businesses that create high-quality jobs and train the worker of tomorrow, are responsible for huge amounts of R&D and are infusing the wider UK economy with leading-edge technologies; the DNA a twenty-first century country feeds on.