Entrepreneurs in the valley of death

Imagine living in 1700 and trying to guess what working life would be like in 100 years’ time factories and spinning jennies would be the stuff of science fiction. Try the same for 1800 or 1900, and you will quickly realise it is an impossible game. You would not have predicted electric light, motor cars, […]

Imagine living in 1700 and trying to guess what working life would be like in 100 years’ time factories and spinning jennies would be the stuff of science fiction. Try the same for 1800 or 1900, and you will quickly realise it is an impossible game.

You would not have predicted electric light, motor cars, home computers. Even when technological advances occur, we have a great capacity for what hindsight might call stupidity; the head of the Post Office said telephones would never catch on in London because there were plenty of messenger boys.

But we can be pretty sure that life in 2100 will be at least as different from life today as our lives are from those of the late Victorians. Technology, engineering and science will invent new things that will change the way people live their lives.

The lesson of history is clear: the countries which do best out of such advances are those which keep ahead of the game whose people do the inventing, and which put the inventions to good use.

Which is why Britain should be concerned about the health of its science and engineering research base, and why we should be pleased that Government policy on competitiveness in the next century has a strong emphasis on research, and on high-tech products and services.

But what is the UK doing to make the best use of the intellectual capital of its engineers and scientists?

UK companies are failing to invest adequately in research and development. Of the world’s top 50 corporate research investors, only two are British. And while corporate research investment grew 17% in the US last year, in Britain it grew a meagre 5%.

Publicly-funded research has been starved of investment for two decades, although there are encouraging signs from the Government.

But one of the biggest problems is the rate at which we are spinning out the ideas from the laboratory bench to the boardroom. The researchers whose brilliant ideas are the backbone of the science and engineering base are not being given the help they need to generate new companies, technologies, and new jobs.

University research is driven by curiosity, and financiers invest in products and processes with proven worth. Between the two is a gap with steep sides the ‘valley of death’.

Researchers who think their idea might be useful need about £50,000 £100,000 to develop it. Then they need about £500,000 to employ a couple of people and set up a laboratory. Once the engineers or scientists have reached this stage, and proved the worth of the idea, the venture capitalists will come in with their investment cheque books.

The Government knows that getting through the valley of death is a problem and has set up the University Challenge scheme, which aims to give universities the funds to invest sums of around £100,000 in the best ideas.

That might soften the initial blow of falling into the valley, but it will not be much help as hundreds of would-be entrepreneurs try to cross the valley bottom, and climb up the steep face of the other side, into the promised land of venture capital.

After last week’s Budget granted it an extra £15m, University Challenge amounts to £35m from the Government, with £20m more from the private sector. That’s less than 600 parcels of £100,000, and there is no commitment to run the scheme in future years.

We can expect a reasonably high failure rate among the new companies. Evidence from the US suggests that in some sectors, fewer than one in 30 high-tech companies is likely to be profitable in the medium term. So schemes such as University Challenge need to be vastly expanded if they are to be of genuine long-term use to the UK economy.

If the UK Government is serious about preparing the economy for the future, it must find serious money to invest in building a bridge across the valley of death.

Dr Peter Cotgreave is Director of Save British Science, a pressure group aiming to increase investment in and improve policies relating to science, technology and engineering.