Chancellor Jeremy Hunt recently told an audience of tech executives that he wants to make Britain “the next Silicon Valley,” with health and life sciences singled out as a priority area. This is an excellent goal, and one we are in some ways already well-positioned to achieve. Before this can happen, however, key blockages need to be addressed around physical infrastructure and how we exploit the excellent research coming out of our universities.
As highlighted in a recent report, the UK ranks highly for the quality of its life science research base, the dynamism of innovation-focused SMEs, and its workforce and culture. Figures show that funding has poured into UK life science startups, shooting up from $800 million in 2020 to over $1.4 billion in 2021, with 2022 figures likely to be even higher when the year-end figures become available.
Among the factors weighing against continued expansion is a lack of lab space and research facilities which is causing some life sciences companies to hit pause on investing here. According to data, there is ongoing demand for over 270,000 square feet of life science lab and office space over the next 1-2 years alone with the bulk of demand coming from small to medium-sized companies with fewer than 250 employees. However, a lab space shortage in the “Golden Triangle” of London, Oxford and Cambridge is leading some companies to reconsider where they base themselves.
Both talented individuals and innovative companies tend to create real-world clusters. For instance, many life science startups value being close to hospitals, making it easier to do everything from setting up clinical trials to collaborating with the NHS. Data show that both for large companies (250+ employees) and smaller ones, proximity to universities and research institutions rank as the top priority, closely followed by being part of an existing R&D cluster and ready availability. Combined with the existing concentration of talent, all these factors make it imperative that we create more high-quality lab space for SMEs near existing research hubs.
The second challenge has to do with unlocking the trove of IP inside our universities. There is top-notch research taking place all over the country, but the road from publishing a breakthrough paper to spinning out is long and fraught. That is why only 3% of UK scaleups are university spinouts, a lamentably low number, with a growing number of founders voicing complaints about what they feel are lopsided terms imposed on them.
While universities are right to ensure they benefit from the innovations created by their researchers in some form, they should recognise that the IP behind a company is only the foundation. No matter how brilliant your IP, it must still be turned into a product, funding secured, your product commercialised and tested in the marketplace, employees hired and offices opened, and a whole company created and scaled. Execution is what distinguishes a successful startup from a failure; universities should take a realistic view on the hard value of their contributions in this area.
The good news is that a growing number of universities seem to recognise that taking a 50% stake in a spinout most likely kills the company’s chances of ever succeeding. The next few years will tell whether lower equity stakes in startups translates into more successful spinouts which can go onto raise funding and become successful.
Finally, we must recognise that high-quality research with the potential to be commercialised is taking place at universities all over the UK. According to a REF evaluation, 41% of the research conducted by UK universities is world-leading and 43% ranks as internally excellent. But high quality research fails to translate into commercial ventures, and to remedy this we will need to look beyond the Golden Triangle and its environs. This means that academic founders all over the country need access to the same type of entrepreneurial community and investor networks found in London.
The approach I’ve pioneered with the P4 Precision Medicine Accelerator and its sibling programme, Cancer Tech Accelerator, is the creation of digital clusters which use a distributed approach to mimic these benefits. Our programmes enable academic founders anywhere in the UK to benefit from the same level of investor networking, expert mentoring and community support that they would find in an existing hub. Since 2019, we’ve supported more than 170 companies through its activity and the companies selected for the programmes have raised £200 million in equity funding * and £20 – £30 million in grant funding. This approach works, and it’s ready to be scaled.
With coordination and buy-in from universities, government, investors, and our researchers and entrepreneurs, there is a tremendous potential for the UK to improve on its already strong position in life science, securing our country’s status as a world powerhouse for the next generation of research-driven tech innovation.
Nathan McNally is the co-founder of the P4 Precision Medicine Accelerator and Health and Life Science Director at Capital Enterprise. You can follow him on LinkedIn here.
Image credit: Unsplash
