Updated to include a quote from Chris Grant, law tech director at Barclays Ventures.

The Chancellor Rishi Sunak today announced a new £1.25bn coronavirus package to protect firms driving innovation in the UK. Included in the package is a £500m investment ‘Future Fund’ for high growth companies impacted by the crisis, made up of funding from the government and the private sector.

Delivered in partnership with the British Business Bank and launching in May, the fund will provide UK-based companies with between £125,000 and £5 million from the government, with private investors at least matching the government commitment. These loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid. This suggests that there is an option to repay the sum, although it is not entirely clear, with TechCrunch commenting today (20 April) that “despite shoddy initial communication” and the suggestion that repayment is an option, conversion to equity will be mandatory with just a few exceptions.

To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third party investors in the last five years.

SMEs focusing on research and development will also benefit from £750m of grants and loans, available through Innovate UK’s grants and loan scheme. Innovate UK will accelerate up to £200 million of grant and loan payments for its 2,500 existing Innovate UK customers on an opt-in basis. An extra £550m will also be made available to increase support for existing customers and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding. The first payments will be made by mid-May.

Sunak said that the package would help to ensure that firms in some of the most dynamic sectors of the UK economy – ranging from tech to life sciences – are protected.

Secretary of State for Digital, Culture, Media and Sport, Oliver Dowden, said: “We are the tech and creative capital of Europe, and it’s crucial to maintain our place. This funding will protect high growth businesses and enable the unicorns of tomorrow to thrive so that tech is in pole position to drive our post COVID recovery.”

Speaking with Chris Grant, law tech director at Barclays Ventures, legal tech startups should benefit from the fund. He said: “It’s definitely exciting and of interest to the legal tech market and it should be on all startups radar, we just have to think about and work through what it means.”

Last month, CBInsights published a report showing a projected decline on private market funding in Q1 2020. The projected decline of 16% compared with Q4’19 will be the second steepest quarterly decline in the past ten years, second only to a 36% decline in Q3’12.

However, the drop-off is more dramatic in Asia, where private market startup funding is expected to fall 35% from Q1’20, compared to Q4’19