UK Startups Double in Number Backed By Larger Scale Investments: Report

Xconomy Europe — 

Investors pumped £2.8 billion ($3.67 billion) into UK-based startups between 2014-2018, marking a four-fold increase from the previous five-year time period, according to a report published by the Nottingham-based incubator, BioCity.

Among the biggest changes in this space over the past five years has been an increase in the scale of investments made into early-stage life sciences companies, says report author and BioCity Chairman Glenn Crocker.

“It used to be rare for early-stage companies to receive £50m plus investment rounds, now it is much more common,” he tells Xconomy, noting that the emergence of larger funds—such as Oxford Sciences Innovation and Cambridge Innovation Capital (formerly Woodford funds)—have driven these larger numbers.

Oxford Sciences Innovation has raised more than £600 million, investing anywhere from £100,000 to £10 million in companies coming out of the University of Oxford. In a similar setup, Cambridge Innovation Capital invests in university-related companies and has raised £275 million since 2013.

According to the report, there also has been a 50 percent increase in the number of startups over the last five years, which has contributed to a “boom in the pipeline” of specialist facilities

Over the next five years, BioCity estimates that these new businesses could need nearly 1.4 million square feet of space. The availability of space is vital, Crocker says, “because without the right facilities, growth will be held back.”

The highs aren’t without the lows, however, and the focus on life sciences in Oxford, Cambridge, and London has made it challenging outside these cities for companies looking to access large scale investments.

Still, “the picture across the rest of the UK is not quite as gloomy as first appears,” says Crocker, “as the life science industry is still thriving in major academic cities other than Oxford, Cambridge and London, but the types of company are different.”

Companies operating in a virtual model, for which the higher cost of laboratory space is not as significant an issue, Crocker says, noting these companies often work out of London and the southeast. “This is because with a virtual, or semi-virtual, model they don’t employ many people or need much space. Whereas in other parts of the country discovery service companies are booming because of the access to talent and the lower cost of the space that these people and facility intensive companies need,” he adds.

Nottingham is one example of a city outside the big three that is home to several chemistry, pharmacology, and drug formulation firms, which Crocker says take on “much” of the discovery work in the southeast.

“So while a lot of investment is being directed into companies in Oxford, Cambridge and London, a fair proportion likely finds its way into the coffers of companies outside those cities,” he adds.

Additionally, drug discovery services companies require less investment, as they generate revenue from an early stage, Crocker explains—making the lack of large-scale funds less of a barrier.

“I think 2018 and early 2019 will have been the peak funding eras for life sciences of the current cycle,” he adds, “but there is still a lot of life science-focused money out there so I don’t expect funding to disappear and of course the nature of a cycle is that if you wait for a bit another boom will come along.”

(Image: iStock/Ong-ad Nuseewor)