Start-ups need back-up

The UK is failing small innovative science and technology firms in their early years. David Connell calls for new legislation to support their R&D.

Last year’s Science Policy Review underscored the government’s commitment to a science and technology-based economy.

The 5.8 per cent annual spending increases over the next decade come on top of measures to support venture capital and university technology transfer offices. But will this really lead to the strong science and technology-based industries the UK needs to remain competitive?

Over at least 25 years the country has failed to turn its start-ups into companies of the scale of Cisco or Sun. Cambridge, our leading technology cluster, is renowned for growing acquisition fodder for big American companies — hardly the best route to a strong 21st century economy.

So why are so many strong new technology companies created in the US and so few in Europe? First, the US is by far the largest market for technology products, giving all non-US start-ups an inherent disadvantage and making the ‘time to first customer’ particularly crucial for UK firms. Second, the US federal government uses its power as a buyer of advanced technology and R&D programmes to support science and engineering-based companies in their formative years.

The most valuable commercial applications of scientific innovations may be unclear for some years. Finding them requires further applications development work alongside potential customers. It may take just as long to prove that products can be manufactured to the tolerances or costs required to be competitive — tasks better carried out in a commercial environment, not a university.

However, companies at this ‘soft’ exploratory stage are hardly ever backable with mainstream venture capital. This is why US federal funding initiatives such as the Small Business Innovation Research (SBIR) programme — which requires that 2.5 per cent of external R&D expenditure by government agencies is with small businesses — are so crucial.

This level of engagement by government departments acting as customers for new technologies does not exist in the UK.

The DTI has attempted to introduce a similar initiative, the Small Business Innovation Research Initiative (SBRI) — but it falls far short of the US programme. The difference in approaches is simple. In the US participation is compulsory for larger federal agencies, and the user-friendly way in which it operates is largely defined by legislation.

The UK’s SBRI relies on inter-departmental consultation and persuasion. There is no template to which departments are required to design their approach and no obligation to participate. Most major departments don’t.

This is a recipe for inaction. Compared with other priorities it is too small an issue to grab the attention of senior officials, and conflicting ‘value-for-money’ and EU procurement guidelines mean this will continue to be the case.

Legislation is required. Along with Anne Campbell, MP for Cambridge, I am calling for a UK law similar to the US Small Business Innovation Development Act. Mrs Campbell has announced her intention to bring in a Private Member’s Bill to achieve this during this session of parliament.

David Connell is founder of TTP Ventures, an investor in early-stage science and technology businesses. His report is available from

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