FST JOURNAL

Summary:

• Early stage investment in the UK is great and later stage is not so good. Could the investment risk for capital be lowered?
• Growing companies need great people but there is a talent shortfall in the UK.
• What if manufacturing sites were as easy to build as service-based infrastructure?
• Scaling business needs clarity, UK policy is often difficult to decode.

The UK is a great place to be. It's a fantastic fertile ground for the growth of innovation, the growth of new ideas and bringing new technologies into the world. The challenge we have is how we turn these great ideas and innovations into real value. 

Just before I talk about the challenges, I want to give a flavour of what type of business Paragraf is so that there’s context when I discuss the main challenges. Paragraf is a global, deep technology business with three international sites and outsourced support across Asia. As a deep technology business we do a lot of research and generate a lot of Intellectual property (IP). We are a hard technology business who meaning we make and manufacture product and we are a materials technology business meaning that product is difficult. At the core of our scale up challenge is the need for specialist skills, talent and sustained capital. It inherently takes longer with deep tech to get to a point where you can realise the value in a significant way. Additionally, suitable infrastructure and a supportive freedom to operate are important to move forward. 

It's a difficult but exciting job to try and grow a company from the inception. We have been fortunate to have investors such as Amadeus (an early stage funder) stay with us for the whole of our journey which is fantastic, and that support has pushed us on. What I thought I'd focus on today are the four critical challenges that I believe if solved in the UK landscape, would benefit everybody. If all four of these happen, then we can maybe achieve a utopia.

Access to Capital

In the UK, we are fantastic at funding early stage businesses, innovation and bringing it forward into fledgling companies. Venture Capital funds like Amadeus have done a great job at bringing out the innovations from universities and showing that they've got real value at that early stage. But as we get towards the later stages, as businesses start to grow and the requirement for scaling capital becomes prominent the availability of dedicated financial support drops off, and over the past few years this has got worse. In order to get the big value out of a deep tech company (just as it starts to turn the corner of creating gross domestic product (GDP), it’s imperative that we hold the bet and enable the company to cross the valley of death and thrive on the other side, through growth capital. 

From Paragraf’s perspective, we've had to scale up through a very capital intensive roadmap, and every time I go out to fundraise it has two significant impacts. Firstly, I have to spend a lot of time raising that capital, secondly, I am taken away from my day to day work as a CEO, the work of growing the business and creating value, there's a double whammy in terms of drain on resource and time resulting in a magnified effect on the business

In our experience there's only one thing that matters to investors, the risk? What is the inherent risk in the business that could lead  them to losing their capital? The way we offset this is we demonstrate that we're not as risky a business to invest in as they may think. Unfortunately, scaling Tech is a risky business to invest in. So, the question is, what if we could lower the investment risk for private capital? For example, we could look at Enterprise Investment Scheme (EIS) rules. We should look at different pools of capital that can come from the government. Some of these challenges are being tackled at the moment, but there are still many open questions. For example, can we start using different monies that are invested in the UK ecosystem to fund scaling companies? 

Access to talent

 The UK has got a lot of growing businesses in innovative tech spaces where we are not the world leaders. We are the world leaders in the innovative technology but not in growing the business. We just don't have the talent base that comes from many years of enterprise growth in specific technology fields. So how do we get that? Hiring talent in deep tech is a real challenge for scaling companies and this is my second biggest challenge at the moment. 

I've hired three Chief Commercial Officers but still have not got that right. We’ve got open job positions that we haven’t been able to fill for 12 months. Recently, somebody we really wanted to hire, a world expert in their field, someone who could have trained some of our younger staff internally, helped actively grow our talent base, went to a competitor in Germany because we couldn't get a visa from the UK government. It's absolutely absurd that we're handing an advantage to other countries, to other competitor companies, through our own administrations actions.

As a question what would happen if the UK talent strategy was industry led? If we want to grow industry in the UK, there needs to be a bigger industry input into how apprenticeships and internships work. How do we get courses into universities that focus on industry, as opposed to just focusing on the subject? If we could do this, then we'd have a great talent base in the future. 

Access to infrastructure 

We are a country focussed on growing a service based industry, and service based businesses. We have lots of infrastructure for Amazon warehouses for example, but we have no infrastructure for growing manufacturing businesses. Paragraf travelled the whole country to find our ideal site. I can go down to Peterborough right now, talk to a landlord and ask,  “Can we have this warehouse?” They'll say: “Yes, as long as Amazon turns it down first”. This is Crazy. So what if manufacturing sites were as easy to build as service-based infrastructure? Regulation often gets in the way. As an example we had a builder wanting to provide a custom site for us, near where we are currently located. They said they could do it in three years, but in three years’ time, we won’t be here. Getting rules and regulations aligned with business and talking about how we can provide infrastructure is absolutely critical.

 Policy in the UK

The fourth challenge is one that is becoming more prominent for Paragraf. Policy in the UK. We're in the semiconductor industry and I don't need to go into the background of what happened with the semiconductor strategy, the history is there for everyone to follow, but needless to say it took far too long to formulate and launch and we still have a significant lack of clarity on it. Understanding policy for Paragraf is now costly. For example, understanding what the NSI Act means practically, working out which countries we can operate in, understanding what the trade regulations are for graphene, and understanding where we can trade and where we can't is really time consuming, and really costly, especially when our focus should be on growing our commercial base, not wondering how we can get our product into, or out of a country. But what if industry led the strategy for a cross party agreement? We need to go across administrations and forget about how we want to run the country as different parties. We need to think about how we want to run it together as an underlying foundation to enable industry to move forward with strength. If we don't do that, we'll be asking the same question time and time again for the next ten, fifteen or twenty years. 

The way in which we set policy determines how we can get talent into the country. The way in which we obtain talent determines whether we can build the infrastructure, and the way that we obtain both of those things determines whether we can get capital. If we want inbound investment into this country, then let's have the government make it clear to the rest of the world that we want business in this country. How do we do that? We build the foundations in policy. I truly believe that the UK can be absolutely fantastic in not just manufacturing, but in deep tech exploitation. It's the exploitation point that delivers the real value of the ideas that have already happened five or 10 years ago in our research institutions and universities.