How can Britain improve investment and commercialisation of science and deep-tech companies

Britain has demonstrated strong capabilities in developing emerging technologies, with data from the ASPI Critical Technology Tracker ranking the UK among the top 10 countries globally, and third for developments in advanced aircraft, drones, and swarming technologies.

Despite this, Britain is less successful at turning this technology into a globally competitive business, with the British Business Bank research showing the UK invested around 10% less than the US relative to GDP over 2022-24. 

Dimple Patel, CEO at NatureMetrics provides insights on how Britain can better support science and deep tech startups.

The structural catch-22

Young businesses often struggle to raise equity before they have started trading or generating revenue. This, alongside the fact that investors place considerable weight on the evidence of commercial success, means that many startups are stuck in a structural catch-22.

Research by the Department for Business and Trade showed that 55.4% of UK pre-trading businesses seeking equity investment received no funding. 

Patel says that the cautious nature of European and UK investors is a big contributor to this catch-22. 

“The funding environment in the UK and Europe is significantly more risk-averse than in the US. Having raised capital from both American and European investors, we found that US investors tend to offer larger cheques and close funding rounds much more quickly,” she says. 

“This can make a difference of up to six months, which is significant for young businesses where time directly affects how long their cash will last.”

“British businesses can, therefore, spend months fundraising, burning through cash in the process, only to secure smaller investments,” she adds. 

This, therefore, limits young startups’ ability to make growth investments, creating a vicious cycle of smaller investments leading to slower growth and less commercial traction. 

“This challenge is particularly pronounced in science and deep-tech, where products are often highly capital-intensive and require years of upfront research and development before becoming commercially viable,” Patel says. 

“Traditional venture capital funding milestones do not always reflect the reality of scientific innovation, which rarely follows a linear development path.”

Patel says that Innovate UK grants can help startups with this issue, as they provide funding that reduces the financial burden of research and development. 

“Companies can still become stuck when they reach the scaling stage, particularly if their funding structures and ownership arrangements have become complicated through multiple rounds of fundraising.”

Backing potential rather than proven success

Patel believes that investors and institutional buyers need to start practicing in investing in potential rather than relying on proven success. 

“When we started working with environmental DNA (eDNA) sequencing around 10 years ago, biodiversity measurement was still a relatively unfamiliar concept,” she says. 

“However, the early investment we received allowed us to collect 10 years’ worth of data. That dataset is now a major competitive advantage: it gives us capabilities that others cannot easily replicate and allows us to use data and AI for increasingly sophisticated modelling.”

“Not every market needs disrupting, but investors need to identify where the real opportunities and inefficiencies lie, and have the patience to wait for those opportunities to develop,” she says. 

Investors also need to back the potential of a team, according to Patel: “A strong team needs a balance of these qualities: taking risks without discipline can put the business in danger, while being too cautious can limit its potential. Investors, therefore, need to understand the dynamics of the team and ensure that different voices and perspectives are heard.”

“The key point is that investment inevitably involves risk, and businesses can fail even when investors have made sound decisions,” she says. 

A lesson from the US

Patel says that the US offers a great blueprint for an ecosystem that handles investment risks more effectively. 

“US investors recognise that most startups will fail, with the majority of returns coming from the small proportion that become highly successful,” she says. 

“They, therefore, build their investment strategies around this reality: prioritising growth, providing companies with enough capital to become market leaders, and accepting that some investments will not work out.”

Founders based in the US who fail are also generally given more opportunities to try again, she says.

She also says that there are lessons to be taken from countries such as Singapore and Canada. Patel says that both use substantial pools of public or institutional capital to provide patient, late-stage funding to growing companies.

“In Singapore, sovereign wealth funds play an important role, while Canada has large, consolidated pension funds that can act as anchor investors. This helps companies overcome the so-called ‘valley of death’ between early-stage funding and becoming large enough to attract public-market investment,” she adds. 

Patel says that government involvement in these countries also plays a role in supporting these deep-tech and science startups. 

“In the US, government departments, particularly the Department of Defence, actively buy from innovative companies, giving them contracts and helping them establish commercial credibility.”

“This means companies do not have to demonstrate extensive market traction before securing their first major customer,” she says. 

She continues: “In the UK, government-funded science projects often go to universities and academic institutions. While this supports research, it does not necessarily help companies develop commercially scalable products.”

In addition, Patel argues that large companies should simplify procurement, reduce unreasonable legal and liability barriers, and pool R&D budgets to test and fund shared innovations, rather than trying to develop similar solutions independently. 

Long-term consequences and policy shifts

Patel says that the UK’s innovation system is facing three main challenges that could have potential long-term consequences. 

She mentions, again, that Britain can produce world-leading science and deep tech innovation but struggles to commercialise it. 

The second challenge revolves around attracting and retaining talent, says Patel. 

“If we want the best people working in innovation, we need to make startups an attractive career choice, both financially and culturally.”

“UK startups often cannot compete with the salaries offered by large technology companies or US businesses,” she says. 

“There is also a cultural challenge: working for a startup used to be exciting, offering the opportunity to build something new and challenge established ways of doing things. But in a restrictive funding environment, it can become stressful, uncertain and limiting.”

The third challenge is the time founders spend constantly raising money and worrying about how long the company can survive. Patel says the time focused on these issues could be spent developing products, innovating, and growing the business. 

“Across the UK startup ecosystem, the cumulative time spent managing funding pressures represents a significant loss of productive capacity,” she says. 

To solve this, Patel provides several cultural and policy shifts that could help investors embrace intelligent risk. 

“I think the government has an important role to play in reducing the risks associated with investment. This could involve providing funding to early-stage companies directly, or helping larger companies feel more confident about entering into contracts with startups,” she says. 

“There needs to be a centralised approach to reducing these risks, because if every organisation is expected to act independently, many will simply be unwilling to take the first step.”

Patel says there is a broader cultural issue around how Britain approaches innovation. She highlights how Britain embraced experimentation and risk-taking during the Industrial Revolution, with this culture playing a key role in driving innovation and industrial progress. 

Under the current AI revolution, Patel says the UK needs to adopt this ‘Industrial Revolution’ approach, accepting that innovation requires time, patient investment and a willingness to fail. 

“The UK still has an opportunity to build world-leading, category-defining companies, but we need to recognise that the global market is moving extremely quickly,” she says. 

“Ultimately, the UK needs to act quickly to address these gaps if it wants to remain competitive and build the next generation of world-leading companies.”

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