Bristol chip maker for voice assistants secures Future Fund backing

Xmos's chips are used in third party devices to work with Amazon's Alexa

The Government is to receive a stake in a chip company designing cutting-edge processors for voice assistants and smart speakers.

Xmos, the 15-year-old Bristol chip designer, received a $6.4m (£4.8m) convertible loan from its investors and the Government’s Future Fund earlier this summer.

The loan converts into equity if Xmos secures new funding, meaning the Treasury could end up with a slice of the company’s technology which is used to power voice tools, such as third party hardware that uses Amazon’s Alexa.

The British Business Bank has refused to disclose the size of its investments in start-ups via the Future Fund, citing confidentiality clauses. However, accounts for Xmos revealed it was a recipient of the funding.

Mark Lippett, Xmos chief executive, said: “When the pandemic started we had significant supply chain concerns about China and Taiwan. We started to think we might need a war chest to strengthen our balance sheet. 

“I felt the Future Fund was done really well. It was smart to set it up with matched investors. It is balanced from a taxpayer to company perspective. Hopefully that will be returned in most if not all cases.”

The Future Fund, set up by the Government through the British Business Bank, was designed as Britain’s start-up “rescue” pot to give companies additional runway during the height of the pandemic.

It was launched as a £500m fund, with £250m committed by the Treasury and the rest to be matched by private investors. 

But the Future Fund has been allowed to run over that total. The Government has now committed more than £588m to start-ups. The fund is due to run until the end of September.

The funding sees the Government offer a convertible loan to start-ups of up to £5m, matched by a private investor. This note converts to equity when the company next raises funding, meaning the taxpayer could end up with stakes in hundreds of early-stage companies.

The Future Fund has used an open process for this funding, rather than having venture investors pick companies they leave to be winners. This has led to a range of companies applying for funding from across the UK, with 41pc outside of London.

Funding has been approved to high-tech start-ups, including a company building gesture-tracking technology in Bristol. But it has also been invested in other start-up ideas, including a drinks maker, a restaurant chain and even a company infamous for its upmarket sex party business.

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