The UK Innovation Ecosystem – Patient Capital’s Role for the UK’s Science Ventures

Rainbow Seed Fund  is a patient capital investor in ideas emerging from the UK’s publicly-funded science base. We are now collaborating with the Innovate UK’s Catapult Network. In recognition of our widening scope, ambition and remit, from the start of 2018, Rainbow will be renamed UK Innovation & Science Seed Fund (UKi2s).

Rainbow/UKi2s recently hosted an investor briefing to share insights into how we help generate impact from our world-class science base.

In his opening remarks, Chairman Ian Taylor highlighted the Research Councils’ investment of around £3 billion each year in research, skills, leadership and infrastructure that creates new knowledge and has an impact on economic growth, prosperity and wellbeing.

He recognised the need to safeguard a culture of inquiry and a culture of research that doesn’t always have an obvious end product that can be commercialised. Yet, great ideas which can impact our lives emerge and need to be captured from the publicly-financed research base. The fund endeavours to boost the UK’s competitiveness and productivity by commercialising key technological advances.

This approach is a vital part of the UK’s Industrial Strategy.

Nurturing and growing start-up technology ventures which have the potential to become leaders in their field generates skills, high-quality jobs and exports and contributes to the longer-term productivity improvement we need to stay competitive as a nation.

Expert, patient capital plays a key role in creating sustainable science-based companies, where there is much work to be done before reaching the market. Rainbow/UKi2s builds world-leading companies from world-leading science.

Rainbow/UKi2s has a general fund for a wide range of scientific disciplines plus a specialist fund for synthetic biology. It brings together 9 research funders and more than £30M of public capital, managed privately but with a public-good mandate (i.e. not normally a commercial seed fund return requirement).

The fund identifies early-stage opportunities by working closely with its partners (led by STFC, BBSRC, NERC, DSTL), with the National Research and Innovation Campuses they support, with BEIS and with many other public-sector science research organisations.

Rainbow/UKi2s now also collaborates with the Catapult Network. Catapults help catalyse and de-risk innovation by road-testing new technology applications that are at pre-return-on-investment. This potential to bridge the gap between R&D and industry seeks to ensure that there is a ‘translational infrastructure’ that allows the most innovative ideas to be commercialised. Catapults are becoming an important contributor to the wealth of opportunity for economic impact arising from UK technology innovators.

Rainbow/UKi2s catchment zones have diversity not only of research disciplines but also of geographical coverage. It is usually the first investor and has played a pivotal role in establishing more than 40 companies based on UK publicly-funded research which would not have emerged from the laboratory without us.

The fund does not displace private capital; it collaborates and leverages in later stage investors.

As the companies grow, it assist with raising later-stage private sector funding, to date helping to lever in over £25 of private investment for every £1 it has invested — that’s over £300M. All the proceeds of investments are recycled into the fund to build the next generation of start-ups.

Since the last event in March, the sale of one portfolio company has been achieved — Cobalt Lights Systems to Agilent (after Rainbow’s support for 12 years) — with the further announcement that Harwell Campus to become Agilent’s global centre for Raman spectrometry research.

Rainbow/UKi2s is now working with InnovateUK in the Investment Accelerator Pilot programme and our first investments from this joint programme will soon be announced. The key to this partnership is that InnovateUK grants tend to assist in helping companies with specific technical challenges whilst risk equity is about building a sustainable venture.

All this is against a backdrop of new institutional structures for the Research Councils and InnovateUK through the embryonic UK Research & Innovation (UKRI).

Aligned with Catapults, InnovateUK and UKRI, Rainbow/i2s creates a system positioned to ensure that the UK maintains our world-leading science standing and maximises the contribution of each organisation to create the best environment for research and innovation to flourish.

 

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