Bringing world-changing research to realised application
Bringing world-changing research to realised application
The Egyptian Room, Nicholas Lyons, Lord Mayor of London, tells us, has nothing to do with the Egyptians – it’s his dining room.
The location is Mansion House, a gilt, ornate and somewhat old-fashioned setting for what must be, for an hour and a half, the most important meeting in future-facing technology investment in the UK.
In November last year, we partnered with the UK Government’s Office for Investment to convene a group of key stakeholders in the House of Lords. On the agenda: how a systematic, multi-stakeholder approach can overcome some of the key and unique challenges that stand between deep tech companies – and growth.
This May we held the follow-up: a change of location, and an advancement of the agenda. With speakers including Lord Dominic Johnson, the UK’s Minister for Investment, Professor Julia Sutcliffe, Chief Scientific Adviser for the Department for Business and Trade and Professor Mary Ryan, Vice Provost for Research and Enterprise at Imperial College London, we set out to ask what it takes to bring impossible research through to realised application.
Past and future
In his opening address, the Lord Mayor asked attendees to look beyond the City of London’s ancient and storied history. Standing in front of a crossed sword and sceptre, he highlighted the UK’s unique position as an ideas marketplace. It was a recurring theme.
The UK has long been an overachiever when it comes to the quality of research institutions – and research output. Three of the UK’s universities appear in the global top-ten ranking, while the country’s academics produce the third-most highly cited research in the world (after China and the US).
The problem, as the Lord Mayor identified it, is that pioneering companies, once scaled, too often list on overseas stock exchanges. It’s a problem of investment. But it shouldn’t be, when assets worth almost three times the GDP of Germany are managed within the UK.
Tech is a high growth area, but the UK isn’t providing the scale of capital required. To secure its future as a global leader in deep tech – and to ensure the world-changing research being done in universities reaches the market – the UK needs to make more capital investment available to late-stage businesses.
One step in this journey is underway: interest is building in the establishment of a private-sector-led, £50 billion, future growth fund. The regulatory environment is also sympathetic. This year, the UK Government formed the Department for Science, Technology and Innovation. With outstanding research, entrepreneurial talent and a world-beating business ecosystem, it’s critical that companies can access the investment they need at every stage of their growth journey – and ensure they can move on to the next.
The swamp to the stars
Lord Johnson emphasised the role the Government is playing in supporting UK deep tech businesses as they scale. Support extends, he said, from practical through to the ideological. Capitalism has been the mechanism that elevated humanity from the swamp to the stars – and with unprecedented challenges looming, the Government is committed to helping the impossible technology that might just solve them reach the market.
The challenges, he explained, can be broadly categorised as physical, societal and philosophical. Physical challenges include the global threat of the climate crisis, while societal describes the major shifts in how we live, driven by a rapidly changing socioeconomic environment. The philosophical challenges involve the profound restructuring of human purpose, as advances in technology, such as AI, threaten to ‘disintermediate’ swathes of the workforce.
Deep tech may hold the key to unlocking solutions for all of these problems, but if it’s to do so it needs money, talent and fit for purpose regulatory support. The UK Government is committed to doing all it can to help businesses in all these areas, ensuring they have the resources they need to thrive. Lord Johnson also made an appeal: to open a dialogue between deep tech stakeholders and government, and ensure the regulatory environment grows even more hospitable to the businesses solving for tomorrow.
Flourish through alignment
Professor Julia Sutcliffe is the Office for Investment’s Chief Scientific Adviser. She’s well-versed in the technology’s future-shaping potential, with sector-spanning experience ranging across private industry, academia, and national and international organisations.
She explained that the common link across the breadth of her experience is alignment. Bringing research through commercialisation to market demands nothing less than ducks in a row. Aligning skills, regulation, infrastructure, investment, risk appetite and pace is essential, and the rewards for getting it right are huge.
The Science and Technology Framework is the UK Government’s blueprint for fulfilling its ambition of turning the country into a science and technology superpower by 2030. It aims to create the conditions deep tech businesses need to flourish, with a focus on five key areas:
- AI: With £2.5 billion invested in the field since 2014, the UK Government has launched a new national AI strategy, covering investment, skills and diversity. Initiatives include scholarship and PhD funding, a commitment to the acquisition of hardware appropriate for cutting-edge research, and the new Manchester Prize, an annual million-pound prize for researchers that drive progress in critical areas of AI.
- Quantum Technologies: Over the last decade the quantum community exemplified the benefits of multi-stakeholder collaboration, establishing technologies, supply chain and business opportunities. The UK is second only to the US in the number of quantum companies attracting investment. There’s a bedrock of capability, from talent to industrial strength in key areas.
- Engineering biology: Investment has been made into building better connections between academia and industry, with a view to leveraging bio-based solutions across sectors. Impact areas range from biofuels to targeted patient care, while the government’s commitment to supporting the field is demonstrated in the recent Precision Breeding Act, which promises to unlock new climate change solutions by enhancing sustainability and resilience in agricultural systems.
- Semiconductors: These are a fundamental technology, with a dedicated Government strategy due out imminently.
- Future telecommunications: The Government is committed to ensuring that the UK stays at the cutting-edge of next-generation digital communication technology, from 6G to quantum-enabled satellite networks. Innovation is being supported through Future Telecoms research hubs, bringing businesses, innovators and academia together with investment, resources and infrastructure.
Fundamentally, Professor Sutcliffe highlighted the Government’s systematic approach to enabling its science and technology superpower vision – and creating the conditions necessary for deep tech businesses to flourish.
But it doesn’t end there; like Lord Johnson before her, Professor Sutcliffe emphasised the need for continued dialogue, for open communication between all stakeholders to ensure the technology nascent in the UK’s institutions can be turned into world-changing businesses.
That dialogue was on display in the breakfast’s concluding panel discussion. Chaired by Professor Mary Ryan, of Imperial College London, it included Professor Sutcliffe, as well as representatives from across business and investment. Vaysh Kewada and Richard Murray are both experienced deep tech business leaders, Vaysh as co-founder and CEO of Salience Labs, a start-up developing high-speed, photonic chips for AI, and Richard as co-founder and CEO of ORCA Computing, which similarly builds cutting-edge photonic hardware to support transformative innovation.
Alongside Niranjan Sirdeshpande, Global Head of Investment at M&G’s future-facing Catalyst Fund, the group could not have been better positioned to reflect on some of the core opportunities and challenges facing the growth of the UK’s deep tech industry.
Professor Sutcliffe returned to her theme of alignment: deep tech is, notoriously, slow, and demands patient capital. Bringing larger companies into research earlier, she said, stands to de-risk radical technology for investors. Alignment across researchers and academics, SMEs and corporates from across sectors is one key way of broadening the range of application outcomes. Deep tech might require patient capital, but risk can be reduced when investors can see proven opportunity in multiple sectors.
With an incredibly strong research base in the UK’s world-leading institutions, Richard said, it’s the later stages that need attention. The UK’s strength is technical, but it falls behind in the end game, when capital investment is higher.
He called for a shift, arguing that UK businesses would benefit from broadening their horizons outwards from technology to a more market-shaping approach. Deep tech is cutting-edge, and sometimes markets aren’t ready. Truly pioneering companies make their own.
At the investment end, Niranjan suggested that it’s incumbent on investors themselves to work together to de-risk deep tech businesses: there are investors with an incredible talent for spotting the early-stage ventures that will, with the right support, make a global impact; others have the capital and knowhow to help companies at a later stage fulfil their true potential. These downstream investors need to be talking to those backing earlier-stage businesses, and vice-versa, if the deep tech ecosystem is going to get the capital it needs to thrive.
Taking the pulse
With a room full of investors, innovators, business leaders and other stakeholders from the deep tech spinout ecosystem, the questions posed by the audience offered an invaluable snapshot into the key concerns in the field today.
Given the lengthy timelines associated with deep tech, how can businesses succeed when customer feedback is so much harder to come by, and iteration happens more sluggishly? How can UK founders be encouraged to shake the perception that scaling in the US is the ultimate end goal, and be persuaded to stay?
The questions spoke to the differences that set deep tech apart. The solutions? Patient capital; greater trust and deeper investor understanding of the idiosyncrasies of this revolutionary field; more dialogue, regulatory support, and, of course, more funding.
Before the assembled company parted ways, Octopus Ventures’ own Rubina Singh took to the podium to offer some closing thoughts. Deep tech innovations have been changing the world since the industrial revolution – and before.
The light bulb, the Haber Bosch process and the steam engine are all examples of revolutionary technology that have unlocked profound, positive societal change. The same change that, with the right conditions, can be made today.
If the UK’s deep tech industry is to live up to its true potential, Rubina identified two key challenges that need to be overcome:
- A perception amongst investors that deep tech businesses hold both technical and market risk, plus an absence of the infrastructure needed to scale these companies.
- A culture of technical excellence, without the market expertise necessary to reach world-changing scale.
We also heard how capital is lacking. It’s not just a late-stage issue – meaningful pre-seed investment is also missing. Unchecked, the effect is a technology drain, as innovators look overseas for financing and a home. More capital investment is needed, at both pre-seed stage and growth stage. At Octopus Ventures, we’re firmly committed to supporting pre-seed deep tech businesses as they commercialise their revolutionary innovations. And as we heard, that funding gap is under scrutiny elsewhere, too.
Present in the room were representatives from universities, start-ups, institutional investors, industry and government. These are the stakeholders that need to be in alignment; the message of the day was that, perhaps more than ever before, they are.