The findings, based on a survey of 500 technology scaleup leaders and 250 VC/PE decision-makers conducted by Censuswide, point to a decisive shift in how R&D is governed and financed, with a huge proportion of investors now actively involved in determining how startups and scaleups approach R&D in order to drive returns. At the heart of this transformation, the survey found, is HMRC’s R&D tax credits scheme.

Nine in 10 (92%) investors say R&D tax relief is essential to startup success – particularly their ability to grow. Once their portfolio companies secure R&D tax credits, nearly two thirds (60%) of investors report the funds are reinvested into further R&D activities, half of them (52%) say they're used to extend operational runway, and 40% report that the money is held in reserve for future access.

Capital is flowing into sectors set to define the next decade. Investors are currently prioritising their allocation of funds into AI (69%), clean energy and climate tech (44%), and biotechnology (39%), which they believe promise the greatest returns. 

“R&D is no longer a back-office cost centre – it’s a core strategy,” said Robert Whiteside, CEO of EmpowerRD. “Investors and founders know that competing in fast-growth technology sectors like AI, climate tech, or biotech takes more than a simple vision. It takes smart capital, robust IP planning, and frictionless access to R&D incentives.”

But investors aren’t just betting on industries and markets - they’re backing capability. According to the study, the main factors investors look for before backing R&D-heavy companies include experienced technical and leadership teams (58%), strong IP strategies (54%), and agile development processes (41%). 

When it comes to results, commercial outcomes matter most to investors. Nearly two-thirds (62%) say revenue growth and commercialisation of a company are the leading indicators of R&D success – ahead of scientific breakthroughs (53%) or market leadership (50%).

However, investors remain aware of the risks associated with investing in R&D-heavy businesses. Regulatory uncertainty and the process of ensuring compliance when introducing new innovations is the biggest concern for investors (48%), followed by challenges in scaling innovation (44%) and IP protection (43%). 

With most investors (88%) now receiving regular updates on the status of R&D tax claims from their portfolio companies, it’s clear that the tax relief scheme has become deeply embedded in investment decision-making. 

“Smart capital is aligning with smart strategy,” added Whiteside. “If the UK wants to lead in high-growth sectors like AI, clean energy, and life sciences, the policy landscape needs to match the ambition of its investors.”

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