There’s an awakening in the world of deeptech investment that if you want results, you need specialists.
Deeptech founders will often cite that there is a dearth of investors operating in the UK who possess the requisite knowledge and experience to help a science-based spinout navigate the vicissitudes of scaling all the way through to IPO.
This isn’t so much a new problem, as one that has been repackaged for the modern era. In 1969, Prime Minister Harold Wilson said: “First we must produce more scientists, secondly having produced them we must be a great deal more successful in keeping them in this country. Thirdly, having trained them and kept them here, we must make more intelligent use of them when they are trained, than we do with those we have got, and fourthly we must organise British industry so that it applies the results of scientific research more purposefully to our national production effort.”
For decades the most senior politicians and policymakers have corralled around the value the UK’s scientific community – with a rich historic legacy and world-leading institutions – can bring to drive the nation’s economic engine. From formative education to careers dedicated to scientific endeavour and discovery, the aim, as Wilson suggested, must be to keep the finest minds here. And this will happen naturally if the most exciting deeptech companies grow here too.
Life sciences opportunity
Recent government announcements have highlighted plans to create internationally-leading life sciences clusters in Euston, Canary Wharf, and Liverpool to join Oxford, Harwell and Cambridge as magnets for the finest scientific minds. Manchester, Newcastle, Uxbridge, West Yorkshire, and Hammersmith have notable clusters too.
Life sciences figured prominently in the Budget and in the science and tech department’s framework. A 2021 ‘Vision’ policy document declared it “will be one of the great drivers of growth in the twenty-first century”. Alongside quantum, AI, engineering biology, semiconductors, and future telecoms, life sciences is deemed vital.
As a nation, we produce enviably good research, attract inward foreign direct investment second only to the US, and rightly received acclaim when a vaccine developed in Oxford saved more than six million lives globally during the pandemic.
Tech ecosystem challenge
Yet when I speak to the founders and CEOs of our best science-based businesses they often feel they succeed despite the ecosystem, not because of it. There seem to be pockets of a ‘literacy problem’ about building successful deeptech companies that runs deep.
In the US, there is a more mature, well-rounded ecosystem that streamlines progress as investors carry out all-important due diligence on spinouts, before supporting nascent companies as they commercialise their inventions, negotiate the inevitable clinical trials and regulatory hoops, and scale.
This is not special pleading or exceptionalism. Deeptech businesses are quite different from companies where you know from the outset how money will be made. You have to get the patents right, the licensing, you have to spend quite a lot of time in R&D before you have any paying customers. The upside though is enormous, which is why the US is investing frankly astonishing amounts of money through programmes like the CHIPS Act. If we want to compete, we need to act systematically, along the entire scaleup spectrum.
Founders tell me we need more talent than most STEM campaigns acknowledge, with, crucially, a wider range of expertise. We must become better equipped to industrialise the process of making intellectual property valuable to the world at scale, the economy at large, and the founders who sometimes literally start with the germ of an idea.
Investor and policymaker
Where could we improve? A cursory look at the political landscape supports the thesis that too few decision-makers have a strong understanding of deep tech or life sciences. The research needs a refresh, but in the 2015-17 Parliament, just 17% of MPs with degrees gained them in STEM subjects vs. the 46% of university students in 2019 who graduated with a STEM degree.
But the skills gap runs wider than our political class. For example, do we have sufficient tech transfer expertise at our universities and do young scientists have enough support to turn a new breakthrough into a world-beating company?
In the US, its recently published national innovation strategy highlighted the need for greater training and support for universities, in particular, to have tech transfer literacy among the staff base. The more recent commitment from the government last autumn to create a £3m fellowship scheme to fund 20 places to train a generation of science and technology venture capital investors was another step. There was no follow-up in the Spring Budget.
We could do more. In 2022, the British Private Equity & Venture Capital Association (BVCA) identified the need to close the long-term skills gap for high-growth tech and science companies, in its submission to the Business and Trade Committee inquiry on industrial policy. The proposed solution – to continue to promote education in STEM, data science and other tech-related skills, and promote enterprise and entrepreneurship at all levels of education, was a noble start.
Beyond the lab
The evidence is clear: economic growth is driven by startups and young companies. If we’re to enhance our competitiveness we need to solve a number of problems, starting with systemically boosting literacy across multiple levels of our innovation ecosystems.
It’s been 55 years since the then Prime Minister Harold Wilson called for action. Let’s hope this generation is the one to truly deliver.
Stuart Grant is the CEO of ARC.
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