Author: Ian Taylor MBE
Introduction
The past year has highlighted the importance of scientific research in the clearest terms. Widespread public appreciation of how dependent we are on scientific excellence for our national well-being and economic prospects has been heightened by the way individual scientists have featured in the press and social media. Fame is, however, precarious, and so every effort needs to be made to enhance public understanding of science, of the risks involved in scientific enquiry and the requirement for increased long term funding for research.
Prior to the pandemic, the UK Government was clear in its ambitions for the UK as a scientific superpower, setting the interim goal of committing 2.4% of GDP to R&D by 2027 and unlocking the value of scientific research through effective commercialisation pathways. The pandemic has greatly reinforced political prioritisation of this area.
I am shortly to complete my time as Chair of the United Kingdom Innovation and Science Seed Fund (UKI2S), a role covering the past seven years and remarkable shifts in the strategic context for UK science. During this period, it has been a privilege to work alongside colleagues from our great Public Sector Research Establishments, reviewing the commercial applications of discoveries facilitated by these organisations. UKI2S is supported by public funds from through the Science & Technology Facilities Council STFC, the Biotechnology & Biological Sciences Council BBSRC, and the Natural Environment Research Council NERC (now all part of UK Research and Innovation UKRI), the Defence Science and Technology Laboratory DSTL and several other world-leading laboratories. From my experience I should like to draw the following observations and conclusions as UKI2S continues its unique and important role.
Unlocking Private Sector Investment
Following the economic shocks and disruption caused by the pandemic, we are looking at a much tougher investment environment. In a submission by BEIS to the Science and Technology Select Committee the department noted it expected an overall “significant decrease in R&D investment and its growth” – meaning reaching the 2.4% R&D target will be much more challenging, despite the Government’s announced increase in public funding and a shrinkage in GDP. The total Government research target depends disproportionately on private sector investment.
This makes the work of UKI2S and its proven ability to leverage private capital even more important. Earlier this year independent analysis by SQW found that UKI2S investment of £15 million has been followed by over £500m of private investment (ranging from angels to VCs and large multi-national corporate investors). UKI2S portfolio companies generated around 700 jobs, and over 50% of the portfolio companies’ total funding (i.e., over £250m) was spent on R&D.
UKI2S is a leading example of how public sector funding can leverage private investment by taking the first risk. The Fund shows that where excellent science can be verified, and when start-ups can be mentored and guided to a firm business proposition, it is possible to unlock substantial private investment to build successful, innovative companies with a positive impact on the economy and society.
Engineering Biology Fund
The establishment when I became Chair seven years ago of the UKI2S sub-fund for engineering biology, thanks to a £10 million investment from BBSRC, was a significant step forward for a research area with huge potential as highlighted in the 2012 Engineering Biology Roadmap. We live in an era where biotechnology, information technology, manufacturing and automation work together to enable bio-engineering. In conjunction with our core partners BBSRC and STFC, UKI2S identified and invested in several ground-breaking companies in this space Synthace (automating engineering biology for speed and repeatability), Quethera (ocular gene therapy), Tropic Biosciences (improving tropical crops) and Nemesis (combatting anti-microbial resistance).
Synthetic biology has increasingly become a key area of scientific advance over the last few years, during which time UKI2S has proven to be an important component of the commercialisation of UK SynBio research. Last October, I took part in a panel discussion on accelerating impact in the bioeconomy. The event, part of the first ever SynbiTECH Virtual Conference, had significant international participation and generated extensive positive feed-back. The SynBio culture is highly collaborative, with synthetic biologists sharing data and tools in the same spirit that drove the open- source movement.
Anticipating Research Trends
Research is inquisitive – scientists seek knowledge often for its own sake. Anticipating what might become commercially applicable is difficult – but that is what experienced fund managers seek to do. It is therefore a bonus when political imperatives reinforce scientific enquiry. Take Tokamak Energy. When UKI2S made its first investment in 2010, it was a marginal and brave (if not “scary”) decision. Fusion energy famously has been a story with many false dawns. However, the UKI2S team saw that the researchers were approaching an exciting point with a novel approach, and now some time later, we have a government which places nuclear fusion as a key plank of the green economy.
Our seed investment of £25,000 helped support the founders of Tokamak in shaping their initial thinking as to how a fusion neutron device might be developed commercially. They took established science and are building on it by pioneering the use of spherical tokamaks in conjunction with high temperature superconductors. Since the founding stake, the Fund has continued to invest further in several rounds of financing, including £1m from our collaboration with Innovate UK on the Sub Fund Accelerator. Tokamak Energy has subsequently found substantial private and public investors.
Our equity stake is now a small percentage of the total – yet without our risk equity injection at that early stage and our crucial patient capital approach, we may not have seen the many breakthroughs that followed.
The Value of Public Sector Research Establishments
UKI2S has provided a bridge between public sector research and private capital. As the Fund’s chair I have been excited by the way we have delivered a strong record of achievement, fostering innovative companies, creating high-end jobs, boosting exports and increasing productivity all out of the ideas and great science born in the UK research base. On the more human side, our seed investment has released the enthusiasm of scientists and enabled them to advance their research and deploy their efforts for the benefit of society.
We should echo the words of Sir Patrick Vallance, from earlier this year, on the important role and great “untapped potential” of the UK’s Public Sector Research Establishments. Great science, talented scientists. It is worth unlocking this huge potential with the backing of public sector risk capital. In the next few years,companies in the Fund’s portfolio are likely to make a real contribution to improvement in health and medical care, agriculture, environment, data analysis and manufacturing. They will have a continuing and positive impact.
To an important extent, UKI2S has been a pioneer. We could be a model not just for further UK efforts internally, but as a competitive edge in securing greater international partnerships for our scientists. We as a nation have to preserve and enhance the outward-facing and open nature of the UK’s research and innovationsector. These are and will be key factors in our continued success and part of our contribution to solving some of the global challenges.
Ian Taylor | http://www.ian-taylor.eu/ | December 2020