A Deep Dive into the UK’s Deep Tech Landscape
Last week, the Royal Academy of Engineering (RAEng) Enterprise Hub published a report on the State of UK Deep Tech, based on Beauhurst data.
The term deep tech defies a universal definition, however it is commonly understood to refer to technologies grounded in innovative engineering and cutting-edge scientific advances, recognised as being capital, time and R&D intensive. The impact of deep tech resonates across various sectors, addressing complex challenges from tackling plastic pollution, revolutionising healthcare, powering sustainable food systems, and beyond.
The recent report aims to assesses the capability, contribution, and spread of the UK’s emerging or deep tech economy.
The UK Landscape of Deep Tech: A Glimpse into the Numbers
Encouragingly, the RAEng Enterprise Hub report reveals a vibrant deep tech ecosystem in the UK, with nearly 3,500 active companies. Whilst England dominates, hosting 87.2% of these ventures, particularly concentrated in England’s golden triangle (Oxford, Cambridge, and London), Scotland is also emerging as a significant hub, showcasing that innovation development flourishes when financial assistance, grants, and equity investments are used to support deep tech companies in commercialising technologies and expanding operations.
Despite a recent investment slowdown in 2022, equity investment in UK deep tech has soared from £174 million in 2013 to over £5.2 billion in 2022. The UK’s ambition to establish itself as a global innovation hub by 2035 aligns seamlessly with the rapid growth of the deep tech sector. However, the innovative ecosystem that has fuelled the sector’s growth thus far remains crucial for its sustained vibrancy. The slowdown of investment in 2022 compared to 2021 calls for strategies to narrow the financing gap compared to the US. International investment, particularly from North America, will likely play a pivotal role in shaping the UK deep tech sector’s trajectory.
The Role of Start-Up and Spinout Companies
The profound impact of academic spinouts on the deep tech landscape is undeniable, serving as the vanguards of cutting-edge innovation and technological progress. With 591 active deep tech spinout companies constituting a substantial 17.1% of the sector’s total business population, these entities are a driving force for deep tech innovation.
Originating from 68 diverse academic institutions, the UK’s strong academic ecosystem has demonstrated its ability to contribute not only to individual success stories but also to the broader landscape, fostering growth and innovation. Leading universities include University of Oxford with an impressive 101 spinouts since 2011, University of Cambridge, Imperial College London, and University College London.
The investment attractiveness of spinouts is equally compelling, with spinouts having secured an impressive £7.02 billion in equity investment from 2013 to 2022, constituting 35.5% of the total equity investment in the deep tech sector. This financial endorsement underscores the strong investment potential these ventures hold.
Innovation Drivers and Supportive Policies
The report also highlights the government’s Science and Technology Framework which paves the way for continued innovation, focusing on the development of AI, engineering biology, future telecommunications, semiconductors, and quantum technologies in particular. Initiatives like ARIA, SEIS/EIS, and “Levelling Up” policies also demonstrate the UK government’s commitment to providing the necessary support, incentives, and regulations for deep tech companies to thrive.
The Role of Intellectual Property
In the complexity of the UK’s deep tech landscape, the role of intellectual property (IP) emerges as a critical driver for converting innovation into commercial assets. Deep tech companies, often at the forefront of technological advancements, are typically IP-rich and require comprehensive IP strategies to safeguard their ground-breaking discoveries and maintain a competitive edge. For many deep tech companies, because of their R&D intensive nature, it may be many years before a deep tech startup successfully commercialises its innovation and emerges from the infamous ‘valley of death’. IP may be the only real asset a deep tech startup has for a number of years, so protecting that IP and developing an effective IP strategy is critical to success.
Investors also recognise this, and many will want to see a robust IP strategy in place before investing. A recent report by the European Patent Office (EPO) and the European Union Intellectual Property Office (EUIPO) found that European startups with patents and trade marks were over 10 times more likely to secure Series A or Series B funding than companies without.
As deep tech continues to propel the nation into the future, the strategic management of intellectual property rights stands as an invaluable catalyst, driving the commercialisation of cutting-edge innovations for the benefit of both creators and society at large.
As the UK looks to expand its deep tech frontier, it’s evident that deep tech is not just a label; it’s a commitment to pushing the boundaries of innovation and steering the UK toward a future defined by state-of-the-art advancements and sustained economic growth.
At Mathys & Squire LLP, we have a profound understanding of the unique challenges and intricacies entailed in protecting cutting-edge innovations for deep tech startups. For more information, please reach out to a member of our Scaleup Quarter team.
A full copy of the Royal Academy of Engineering Enterprise Hub report on the State of UK Deep Tech can be found here.
Written by: Annabelle Carver and Jessie Harrison