The report highlights that the UK faces a shortage of investors with relevant expertise to understand the fundamentals and potential of deeptech startups.

Deeptech companies are leading the development of novel technologies that could transform the UK’s technological capabilities and global competitiveness, including manufacturing & materials; robotics, hardware & chips; networks; healthcare; frontier applications; energy; and AI & computing. Deeptech investment has been strong over the past decade, with higher deal values and pre-money valuations when benchmarked against all VC-backed companies.

Since 2020, the UK deeptech sector has consistently attracted over £5 billion in annual venture capital funding. However, 2024 presented significant challenges for startups seeking funding due to the economic climate, including higher interest rates, post-pandemic inflation and lagging productivity growth. The result has been that fewer companies receiving bigger cheques as investors become more risk averse, with late stage deeptech companies being more successful in closing larger deals. The notable exception to that investment trend is AI startups.

Nondomestic investment into UK-based deeptech companies remains elevated, with firms from outside the UK participating in more than 300 deals each year since 2021. London’s status as one of the world’s top technology hubs, with an excellent talent pipeline are among the draws for nondomestic investors.

Mutual funds, family offices and sovereign wealth funds have been increasing investment in UK deeptech, these non-traditional investors have been involved in over 500 deals since 2021. In recent years, private equity firms have been making more minority-stake investments in deeptech companies.

Building investment knowledge: Science and Technology Venture Capital Fellowship

Together with Imperial College London, the Academy is delivering a new Science and Technology Venture Capital Fellowship, a unique, government-backed initiative designed to upskill investors’ knowledge and experience in deeptech and life science sectors and unlock capital in this critical space.  

With tailored teaching, customised networking and exclusive access to industry leaders, the programme will enable more investment in the UK’s R&D intensive SMEs.

More venture capital investment is essential to supporting the development of businesses that will secure renewed economic growth for the UK, using deeptech to address some of the biggest challenges of our time, like food shortages and natural disasters.  

Science Minister Lord Vallance will officially launch the Fellowship at the Academy on the evening of 22 January.

Science Minister Lord Vallance KCB HonFREng FRS FMedSci says: “Too often, cutting-edge innovations and burgeoning companies are stymied in their growth or forced to leave the UK, due to a lack of access to capital.

“Together with Imperial College and the Royal Academy of Engineering, we are delivering a fellowship that will make more investors aware of the formidable potential of the UK’s deeptech and life science sectors.

“This new fellowship supports investors to make more informed choices about where they put their capital, opening up a wider pool of capital for new science and technology firms, and helping to harness R&D as a force for economic growth.”

Sir John Lazar CBE FREng, President of the Royal Academy of Engineering, says: “Deeptech companies are crucial to the economy: strategic home-grown technology is vital to the country’s industrial strategy, growth ambition and productivity agenda.

“As today’s report shows, the UK has many fantastic deeptech companies that attract investment from the UK and globally. But continued success cannot be taken for granted. We must ensure we remain an attractive place for entrepreneurs to start up new deeptech companies from our extraordinary science and engineering R&D base.

“It is also essential that we unlock investment at scale to enable growing companies to remain here, rather than relocating overseas. We have the ambition, energy and talent to create the great companies of tomorrow, that can help to solve problems and improve the world, and we need to support them to make that happen.”

Professor Mary Ryan CBE FREng, Vice-Provost (Research and Enterprise) at Imperial College London, says: “This new Fellowship marks a significant milestone for the UK innovation communities and highlights the vital work we are doing at Imperial to enable the translation of groundbreaking scientific research into real-world commercial ventures that address society’s most pressing needs. Deeptech is critical for tackling global challenges, from climate change and food and water insecurity to advancing medical breakthroughs.

“As a trusted partner between the worlds of research and enterprise, we are committed to supporting and developing new approaches to scaling the impact of new discoveries, helping innovations and innovators reach their full potential. These fellowships will enhance the UKs capacity to translate deeptech, ultimately driving economic growth in both London and the UK.”

Ana Avaliani, Director of the Royal Academy of Engineering’s Enterprise Hub, says: “The Royal Academy of Engineering Enterprise Hub has a unique vantage point on the nation’s deeptech scene. From advanced semiconductors and quantum encryption to biodegradable seaweed plastics and filtering toxic chemicals from water, we have spent over a decade helping entrepreneurs to convert breakthrough engineering innovations into disruptive spinouts, startups and scaleups across the UK.”

“We look forward to collaborating with Imperial College Business School on this new Science and Technology Venture Capital Fellowship. We have developed tailored training and bespoke networking opportunities for investors to understand the fundamental dynamics of deeptech and keep this industry growing on the roots of success we have nurtured. The companies we support have the potential to transform entire industries and address some of the world’s most pressing challenges.”

Professor Ramana Nanda, Associate Dean for Enterprise, Imperial College Business School and Director of Imperial’s Institute for Deep Tech Entrepreneurship said: “Imperial is proud to be delivering this unique Fellowship programme in partnership with the Royal Academy of Engineering.  By helping to develop the specialised talent that is needed to deploy greater risk capital into the UK’s life science and deeptech sectors, this Fellowship will play an important part in supporting the UK’s ambition to be at the frontier of building impactful life science and deep tech ventures that that deliver jobs, economic growth and tackle the most pressing global challenges.”