FST JOURNAL

Summary:

• Innovate UK is organising its business around products and services, technology domains and place. It has ambitions to refine customer centric pathways towards growth through innovation – thinking beyond research and start-up and towards growth at scale
• Innovate UK offers more than just grants, including a scale up programme of business support, connections across the innovation eco-system, infrastructure and finance.

One of the biggest needs we have identified is to go beyond the initial idea and its development, towards helping businesses scale-up through their innovation. Traditionally, Innovate UK has been great at helping early stage businesses create and nurture their ideas and innovation, but we increasingly recognise that we have to help those businesses grow beyond the need for our support and a reliance on public money to access private capital, get to market and scale effectively.

I'm really proud to represent Innovate UK because we are at the business-facing end of UK research and innovation. This pride comes from being part of an organisation that's currently supporting around 6,500 projects, that last year processed more than 4,500 applications. That volume of activity demonstrates the thriving the s creativity and sense of purpose that fuels our innovation system. It creates the momentum that's coming from the research base and leading to business-led innovation which is really powerful. 

But my excitement also comes from the shift we're beginning to go through at Innovate UK towards becoming more aware of and responsive to the needs of our innovators. Part of that is making Innovate UK more customer-centred, and that means thinking more about the innovator as we build our portfolio of products and services, balancing the important role we play in managing public money and delivering value for the taxpayer with the needs of innovators. 

 Let me focus in on the products that I think are particularly relevant to scaling businesses.

 Innovate UK is not just about grants. Grants are a great way of fostering collaboration and de-risking some of the earliest stages of groundbreaking, cutting-edge and high-risk innovation. But they're not always the answer for businesses looking to achieve commercial growth and scale – they are not a substitute for genuine risk capital in a business. 

 Sometimes what the business needs at that point is guidance and a critical friend who provides constructive challenge. Innovate UK Business Growth has a dedicated scale-up offer, aimed at providing those things and our scale up directors are experienced business people with an innovation lens who work with individual businesses to support them as they mature. 

 We also have a pilot programme running in conjunction with the Scaleup Institute, to help businesses understand the value of non-executives whose skills can round out their board and mature their governance. We are working to identify the skills needed in the innovation system, for example through our Workforce Foresighting Hub, so we can help businesses understand the skills needed in the future, while connecting the market so the future with today’s networks and experts through Innovate UK Business Connect. 

 If at Innovate UK we can bring together the innovator, investors and prospective customers, it helps deliver the de risking message successfully, and helps us to clarify the journey from idea to sales and growth. If you can see the customer, this will help you understand which routes market provide the greatest opportunities and the business model needed to grasp them. In terms of investment, government can commit as much as it wants in terms of resource and capital, but whatever we do will always be less than the market can provide as a whole. So how do we bring investors in to support those businesses and how do we de-risk the great new technologies we see as critical to the future? 

 Innovate programmes

 There are two programmes within my portfolio which look to enable those pathways: first, Investor Partnerships. 

 Investor partnerships is a grant programme. The grant can be up to 70% for some industrial research. But unlike with a traditional grant programme, here we want to link our grant to a business with aligned investment from an investor partner. What we want them to do is to put an equal amount of capital into that business. So we put in half a million, they put in half a million, we put in a million, they put in a million. This brings foundational capital into the business while we're looking after that really risky, difficult stuff on the innovation side. The investor’s money goes into growing a sales team or building commercial function, building financial capability, or maturing the governance. Areas in which investors are expert already.

 I’m pleased to say that we now have 115 investor partners signed up from the UK, Europe and beyond including Amadeus Capital Partners, here today, and angel networks through to people working in particular verticals such as Life Sciences or agriculture. The benefit of getting an investor in earlier is that you've got them on the hook, they understand your business, and you've got the benefit of their experience and insight into your business from an earlier stage. You’ve also got them on the hook for building syndicates for future rounds. So far this approach has leveraged £1bn in private investment. 

The second programme is innovation loans. We can lend up to 2 million for later stage research and development (r&d), per project. One challenge for late stage r&d is that the subsidy control rules mean that typically we can provide about 45% support. However, what we can do on innovation loans in exchange for a little bit of interest, and patient repayment terms is that we cover 100% of the costs. And we can do that quarterly in advance. You only have to pay half the interest during the period when you're doing the r&d and only once you get to market do we say okay, we'll start having the money back now, please. And non-dilutive capital at the right time can be helpful when you're building a sensible, balanced funding strategy. 

Lastly, it is clear that the scale and impact of Innovate UK will be greater the more we can support current and future scale-ups, as well as spinouts and startups. It’s a shift for Innovate UK to lengthen its support pathways, but it's the direction we're heading in and we are doing so in a way which is connected to and in lock step with our colleagues at British Business Bank and UK Infrastructure Bank. We're also looking beyond our fellow Government bodies, by doing joint work with the Scaleup Institute and the London Stock Exchange Group. 

Seeing UK businesses take our support, succeed and grow beyond the need for public money is absolutely the thing that drives me on and we will continue to grow the products and services we need to deliver on those opportunities.