A year of global challenges emphasises the role of science and technology in our changing world
2021 proved to be full of opportunity for the investment community and another successful year for the UK Innovation & Science Seed Fund. With continuing uncertainty related to the pandemic, it was good to see the UK economy rebound strongly. The pandemic has driven awareness of the role medical research plays in our lives and its importance for this and any future pandemics. Biotechs therefore reaped the benefits of increased investment, including in our portfolio; for example, Crescendo Biologics recently announced a global collaboration with BioNTech to develop multi-specific precision immunotherapies. We’d like to see the pace of venture investment continue with focus expanding to other areas of scientific innovation; our Fund invests early to de-risk opportunities for private capital to help scale. Whilst challenges remain, it has been a positive year for the Fund and we’d like to take a look back on some key themes we’ve recognised as we move into 2022.
A busy year for UKI2S
The past year has seen significant positive developments for UKI2S, with an increase in the pace of our investment, our fund manager growing through acquisition, a new Chair of our advisory board and more members to welcome to the fund management team.
We were thrilled to announce an additional £10 million investment from UKRI, enabling the Fund to increase the number of new UK businesses it can support and to help them go faster with more capital. This additional funding was a testament to the quality of research emerging from UK institutions and the role of high-risk specialist seed funding to support its commercialisation.
In April, our fund manager Midven was acquired by Future Planet Capital, a global fund management company focussed on impact investing in growth companies from the world’s top innovation ecosystems. Future Planet Capital has built a track record of catalysing growth to scale technology companies into nascent global players. Whilst UKI2S retains its strong core focus, this wider expertise and network will provide further opportunities to fund and support the most innovative companies emerging from the UK’s scientific research.
Andrew Mackintosh joined as Chair of our advisory board, bringing extensive expertise in industry and investment to help guide the Fund’s progress over the coming years. We also welcomed Letizia Gionfrida and Hassan Mahmudul to the team. Prior to joining, Letizia founded and spun out from Imperial College London a digital health company, securing a £1.2m pre-seed investment. Hassan began his career in molecular biology and fusion protein research, developing his interest in business while working as one of the first employees for a leading start-up based in Newcastle and founding a networking platform for the scientific community. Both Letizia and Hassan are focused on sourcing and evaluating promising new companies for the Fund to invest in.
The key themes of 2021
The COP26 UN Climate Change Conference sharpened everyone’s focus on climate change, with global weather events putting the climate disaster into sharp focus. While this recognition has been building over the last few years, the heightened focus and government commitments to reduce CO2 emissions will undoubtedly result in increased investment and incentives for companies providing solutions. We were able to showcase two of our most impactful climate change linked companies, Vector Photonics and Tokamak Energy, at COP26 as part of Future Planet Capital’s company showcase. We introduced them to His Royal Highness, The Prince of Wales, and shared the work they are doing to develop low energy laser technology and progress nuclear fusion, respectively.
At UKI2S, we focus on investing in innovative solutions to some of our biggest global challenges so companies working in alternative energy have always been of interest, but we are also pleased to invest in companies providing other solutions to our changing climate. Mirico’s unique Laser Dispersion Spectroscopy methane emissions monitoring solution was showcased as part of an EU led project by Enagás in Spain. Tropic Biosciences continued its development of new crops to reduce waste and improve food security.
Another focus has been on innovative new medicines including cell and gene therapies. Again, these have been in development for a number of years but challenges have remained in their commercialisation, especially when it comes to production and delivery. Recent progress, in some cases driven by innovations in the pandemic, is resulting in solutions to these challenges and we are seeing many more drugs reaching clinical trials and the market. This will continue to grow in the coming years, bringing the promise of new treatments and even cures. We are funding clinical trials for Pre Symptom Health, which is testing a diagnostic that could identify patients with COVID and also at risk of sepsis to help prevent premature deaths. In a similar vein, AgPlus Diagnostics completed its DASA (Defence and Security Accelerator) programme, funded under the 2019 Point of Care Diagnostics at the Front Line-phase 1.
One area that is sometimes overlooked by investors is hardware. This reluctance is sometimes due to the hardware in question being harder to understand and is not considered to be one of the ‘hot’ areas of investment. At UKI2S however, we see some incredible innovative ‘hard tech’ companies and this area offers a clear opportunity for our Fund to make a difference. Some examples in our portfolio include Quantum Dice with its source-device independent quantum random number generator, Helix Geospace’s pioneering highly accurate positioning devices, and QDot’s work in high power density battery pack systems to enable clean flight.
What will 2022 bring?
As with 2021, uncertainty remains around not only the pandemic, but also the implications of Brexit and concerns around rising inflation. The pandemic has limited people’s movement resulting in creative solutions being used by companies looking to employ talent from outside of the UK. However, some disciplines (for example engineers with space heritage) are in high demand globally and our portfolio relies on the UK continuing to be seen as an attractive place to work with low friction for the best talent. A ‘bonfire of regulations’ has been promised in order to incentivise the trial and adoption of new technology, but the detail of this remains to be seen. For our companies, reducing regulation may not be the incentive it seems, as these organisations are creating technology that will have a global impact, so will need to abide by international regulations.
The other area we will be keeping watchful eye on is inflation, and the implications for our portfolio. While inflation may not pose a direct threat, its consequences could be significant for early-stage companies. Cost of wages is already increasing dramatically, as is that of R&D equipment, both of which are already big expenditures for these companies. The other concern lies in valuation of companies. A higher valuation can seem like a good thing for companies initially, but over-valuing small companies can have significant implications down the line. For that reason, inflation and its effects will certainly be of interest in 2022.
As we emerge from what has been a challenging two-year period, we are pressing ahead and funding the commercialisation of even more innovative science and technology. Investment in our start-up ecosystem will cement the UK’s position as a science superpower and we look forward to working closely with our Partners to drive this progress.
We’re always looking for promising companies to invest in so if you’re an early-stage company based on innovative UK science, check our investment criteria and get in touch to find out more about funding from UKI2S.