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Reacting to the ScaleUp Institute Report


This week, the ScaleUp Institute, Innovate Finance and Deloitte released a report entitled ‘The Future of Growth Capital’. The focus of the report is the gap in growth capital for innovative and fast-growing companies. The report highlights that it is not a new issue for the UK and that should be addressed as soon as possible, in order for the economy to recover and for the UK to seize an opportunity to develop a “bigger ecosystem” of world beating scale-up companies.


One of the five recommendations of the report is for Innovate UK to expand its role and scale (see below).


Get a grant – unlock future investment

Various evidence suggests a grant from Innovate UK (or other Government funder) can increase investor confidence and de-risk investment for VCs, Angels etc. Analysis from the report shows that over the last year, Innovate UK’s grant schemes “enabled 642 scaling companies to realise their growth trajectory, unlocking an additional £3bn in private capital on top of the £205m in grant funding provided” – quite the return! What is clear is that an R&D grant from a funder such as Innovate UK can act as a stamp of approval and provide a good degree of assurance to private investors that putting their money into a company is no longer such a risk.


Equality and diversity in innovation – don’t limit it to gender

Equality, diversity and inclusion (ED&I) should be high on the list across all sectors. I spoke to an outgoing lead for ED&I from one of the UK’s main R&D funders, who noted that one of the biggest challenges they faced was overcoming the assumption that ED&I activity should all focus on gender.


Let’s take the Black, Asian and Minority Ethnic (BAME) community, for example. Across Europe, less than 1% of business founders are black, less than 1% of VC funding goes to black men and less than 0.006% to black women. It all reads quite drearily and it is a tiny snapshot of a much wider problem.


Given the scale of the diversity opportunity (the UK economy would be £24bn better off if BAME colleagues progressed as quickly as their white colleagues), the report suggests that Innovate UK should expand its diversity programmes, such as Women in Innovation or the Investor Partnership Programme, to include “all elements of diversity”.


What are some of the recommended changes for Innovate UK’s expanded role?

A number of suggestions are made in the report as to how Innovate UK could expand its operations to benefit scale-up businesses.


Increase R&D investment through financing technology demonstrations: the commercial scale demonstration of technology is hugely important on the journey to market. Without it, innovations risk dying somewhere around stage 4-6 of the Technology Readiness Scales. Demonstration de-risks technology and innovations for future investors.


Broader interpretation of the Frascati Manual: The way stages of R&D are classified (e.g. experimental development, industrial research, feasibility studies) should be reassessed in order to ensure it optimises growth and R&D opportunities.

Expand the use of the Small Business Research Initiative (SBRI): The use of SBRI by Government departments and public bodies should be encouraged. SBRI brings together the aforementioned stakeholders with innovative businesses to solve problems.


Increased partnership with the private sector: Packages of grant funding and private equity investment should become more commonplace, with evidence showing that companies which can leverage both are more successful.


Change(s) on the horizon?

It seems unlikely that any changes will be adopted immediately, though the recommendations from the report do have some merit. This is likely to be one of many reports surrounding the future of UK growth being dropped on the desks of Whitehall policymakers. It remains to be seen what advice will be absorbed and what will be dismissed.


Photo by Wesley Tingey on Unsplash

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