How investing public money can support the development of technologies for a greener future

UKI2S Chair, Andrew Mackintosh

In the lead up to COP26, Andrew Mackintosh, the newly appointed Chair of UK Innovation and Science Seed Fund (UKI2S) Advisory Board, shares his insights on how best to support the fund’s role in supporting the development of new and innovative technologies that will help us reach our goal of Net Zero.

New companies for a new future

When planning a greener future, we need to begin by looking at the world we’ve built today. We rely on fossil fuels for power and transport, fertilisers for agriculture, and oil by-products for plastics and other materials. But if you track back to where these products began, they’re often underpinned by scientific breakthroughs and complex technologies dreamt up in a more curiosity-driven, academic environment. Very quickly, the market sought out those that were relevant and accelerated them forward, developing the enormous multinationals that drive these industries today.

But now, as we look to achieving Net Zero, we need a whole new range of technologies and innovations. History suggests that this change will be driven largely by new companies which approach global challenges without historical baggage. If we take Tesla for example, it didn’t exist 20 years ago and now it’s a leader both technically and commercially. Of course, there’s a crucial scale-up role for established companies too – they’re extremely good at what they do. But it’s the newer companies, with their willingness to take risks and agility to seize opportunities, that often lead the development of the new deep technologies we need. And that’s where the importance of early-stage investment from publicly-funded initiatives such as UKI2S comes in.

Public Funding, Translation Mechanisms, and Unmet Need

To accelerate the development of the innovative solutions that will help us reach Net Zero, we need to provide support. And there are three vital components to that support.

The first is research funding. The science capabilities behind the technologies we rely on today largely came from research and academia. The UK punches above its weight in the output from publicly funded science research. It’s critical that this excellent research base is supported and maintained, and while we strongly support the government’s aim to drive public and private research intensity towards 2.4% of GDP, we need to reach this as a minimum as other countries such as South Korea are already exceeding it.

But funding alone isn’t enough. The second critical component is translational mechanisms. Research funding provides a fertile base, but a whole network of ideas must be connected for commercial viability. We need money, we need excited, mission-driven people, and we need a community of support. From skilled people such as engineers, project managers and intellectual property experts, to facilities, infrastructure and transport, there’s a whole network we must put in place to support the creation of the new companies that will be pivotal to our future.

And the third vital component is obviously unmet need. In some cases, the unmet need is clear, with a genuine commercial opportunity in today’s markets. But in other cases – especially when we’re talking about green technology – the opportunity is in future markets. And in these cases, it’s often the role of government policies to incentivise developments and provide the early market pull, which funding bodies like UKI2S can respond to.

Early-stage, highly supportive and patient

UKI2S provides very early support to companies at the start of their journey and through the translation phase. And this support is more than just financial – our team act like a foster parent, providing help, mentoring and contacts alongside funding. Importantly, we provide long-term patient capital, and we encourage the companies to be ambitious even if that means they need to raise much more capital, diluting our ownership. The new technologies that we’re going to rely on in the future can take time to develop, and we respect that, supporting them for as long as they need.

Take Tokamak Energy, for example. We began supporting them when they were a very small team with the ambition, initially, to treat nuclear waste. Fusion is capable of generating almost infinite amount of energy with almost no radioactive waste, so from a climate change point of view, it’s one of the key routes out of the current crisis. At the beginning, Tokamak’s pitch was very challenging for investors: it was a large risk to invest in a small start-up’s belief that their unique approach could short-circuit the challenges faced by an existing tens of billions-euro international fusion reactor development project. But with our long-sighted funding, mentorship, and patient capital provided in the early days, Tokamak Energy is now a leading global commercial fusion energy company with almost 200 employees and over £100 million of external funding.

At the other end of their journey with us is Eagle Genomics, an early-stage company aiming to drive the understanding of the global microbiome. Eagle Genomics provides data to enable scientists to understand the microbiome’s impact and applications – an understanding which is currently lacking despite its acknowledged importance in agriculture and health1,2. It’s a company with exciting market opportunities in the future, underpinning advances across multiple significant sectors in coming years.

Looking to the future

The technologies with the potential to make the greatest change are those in sectors we’re already familiar with in the context of reaching Net Zero: including energy generation and storage, as well as innovations in transport, infrastructure and agriculture.  It’s fairly well understood as to where the opportunities are – the challenge is taking both existing and future technologies and trying to match them to those opportunities. New and innovative companies are taking on this vital challenge, but innovative early-stage companies come with technical risks, market risks and require long term capital investment. These factors make it difficult for commercial funders to invest, and this is where funding organisations like UKI2S come in, providing crucial support for the companies developing the technologies that will provide a net-zero future.