Yahoo Finance Startup working with NHS 'plans for the worst' despite government coronavirus support
The founder of a startup that helps the NHS manage shifts says she fears the worst despite new government support for innovate tech businesses.
“We need to basically plan for the worst,” Melissa Morris, founder and chief executive of Lantum, told Yahoo Finance UK this week.
Morris said she was “sceptical” that she would be able to access new government support for startups and warned that many early stage businesses would miss out even if the government does make application easy.
“The devil is in the detail,” Morris said.
Founded in 2013, Lantum is a platform that helps healthcare providers manage shifts in places like GP surgeries, care centres, and hospitals. 20,000 clinicians are registered on the platform in the UK and 2,000 organisations use Lantum’s software.
“The whole reason we exist basically is just to save the NHS money,” Morris said. “There’s a huge, huge bill — about £4bn [$5bn] every year — spent on recruitment agencies every year.”
Demand for Lantum’s product has increased during the COVID-19 pandemic but the company has been forced to furlough 12 of its 65 staff as funding has dried up.
“We’ve had to engage in reducing costs at a time when there’s really high demand for our platform,” Morris said. “It’s been pretty frustrating.”
Lantum was “flat out rejected” for a coronavirus business interruption loan (CBIL), the government’s flagship support scheme, because of past losses.
The business had planned to raise £10m this year before the pandemic broke but paused the plans due to pressure in private funding markets.
The government launched a new package of support for startups, worth £1.25bn, on Monday. But Morris said she was sceptical.
“Given our experience of being rejected for the other one, until it’s signed, until the money’s in the bank and until it actually comes to fruition, I just don’t really trust that it’s something we can make the most of,” Morris said.
“Hopefully the Future Fund [the government’s flagship new measure] will mean we can bring people back from furlough, but given our experience with applying and being rejected I am sceptical.”
Morris’s downbeat outlook came as the government trumpeted the success of the UK’s ‘healthtech’ sector, saying it had an important role to play in fighting the novel coronavirus pandemic.
The government said on Wednesday the UK ‘healthtech’ sector now employs over 127,000 people and is worth more than £34bn to the economy.
“Over the last month, the UK’s healthtech sector has shown why it is a global leader, quickly using its expertise to develop practical solutions to help the government and the NHS with innovative products and services to respond to those in need,” digital minister Caroline Dinenage said in a statement.
“We owe a huge debt of gratitude to the startups and tech companies that have switched their entire focus to backing the national effort to tackle this health crisis.”
While many startups are focused on fighting COVID-19, Lantum is not alone in having to furlough staff. Babylon Health, which provides remote medical consultation software, has furloughed 5% of its staff, according to Business Insider. Babylon is currently helping the NHS manage demand for its 111 help line.
“It was a really difficult thing to have to go through,” Morris told Yahoo Finance UK. “And particularly when everybody is so excited and enthusiastic to support the NHS at this time. It really hit people’s morale.”
The government on Monday announced a new £500m ‘Future Fund’ meant to support businesses like Lantum and Babylon. The government will ‘match’ support from venture capitalists up to a total value of £250m.
“I can just see that there’s going to be some sort of criteria or some sort of catch that means that a number of businesses just won’t be eligible. I just don’t know what that will be yet,” Morris said. “Everything seems so simple until you put an application in. Until I’ve got the money I’m going to be very sceptical.”
Even if businesses like Lantum are successful in accessing cash, Morris warned many others will miss out.
“Can everybody get a VC to match the funding? VCs are going to have to choose, kind of like a Sophie’s Choice situation,” she said. “They can’t support all of their portfolio. They’re going to have to decide which one are more likely to make it through.”
Natalie Ceeney, the chair of industry group Innovate Finance, told Yahoo Finance UK last week: “A 50-50 match funding would help some, it wouldn’t help enough. You suddenly limit the pool to just the cream of the crop rather than all viable companies. Secondly, not everybody’s already got a VC.”
Nimesh Shah, a partner at accountancy firm Blick Rothberg, said: “Raising investment is one of the biggest issues for start-up businesses, even during normal times, and it is going to be naturally more challenging to convince private investors given the present situation.”
The £250m of government funding — which will be handed out in convertible loans of up to £5m — may not stretch far either.
“In London, I’m on a founders email group that has more than 400 founders on it — just London, just tech,” Morris said. “If you think every single one of those applied for a million, which conceivable they could all do — are they really going to fund everybody? This is why I’m sceptical.”
Beauhurst, a consultancy that tracks the UK’s startups and high-growth businesses, said over 15,000 companies across the UK faced moderate to severe risk to their operations as a result of COVID-19.
Morris is one of the lucky ones. Her investors have agreed to put in bridge financing to support the business, which she hopes will ultimately be matched by the government scheme.
For now, Lantum and many other startups like it are focusing on making sure they can keep going.
“It’s something I just didn’t think we were going to have to go through,” Morris said. “Hopefully it’ll be a temporary thing.
“The most important thing is that the company survives to the other side of this.”
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