It’s true that the US has access to a far larger amount of growth investment for later-stage firms than the UK and Europe do. The US has at least seven times as many large-scale venture capital funds as Europe, according to the European Investment Fund. Therefore, it is noteworthy that a new growth fund has emerged in the UK.
A new £100 million ($126 million) “Opportunity Fund,” which is essentially a growth fund, has been introduced by Cambridge Innovation Capital (CIC), which makes all of its investments in the Cambridge ecosystem within and surrounding the renowned university. CIC has a special partnership with the University of Cambridge and has $757 million invested in more than 40 firms.
The fund, which will invest in growth-stage deep tech and life sciences startups, is being anchored by Aviva Investors and British Patient Capital.
There have already been two investments. To date, Riverlane, a quantum computing error correcting startup, has raised $120.7 million, whereas Pragmatic Semiconductor, a major chip designer and producer, has raised $389.3 million.
Up to £20 million ($25.2 million) will be invested by the new CIC fund in each of the deep tech and bio sciences companies’ later-stage funding rounds. Naturally, the goal is to solve the UK’s long-standing problem with a funding vacuum for later-stage entrepreneurs, which often causes those businesses to go abroad, typically to the US.
This problem was partly the reason behind the UK government’s announcement last month of its “AI Action Plan,” which included a commitment to create Europe’s “Silicon Valley” by boosting the already-existing tech ecosystems surrounding the renowned Oxford and Cambridge universities.Along with a £14 billion financing package, the “Golden Triangle” of London, Oxford, and Cambridge—which consists of five prestigious UK universities—will also receive improved connections, including transportation.
In a call with TechCrunch, Andrew Williamson, Managing Partner at CIC, explained that while CIC has historically made investments in early-stage businesses in the Cambridge area, many of them were developing into established technology.
“In the past, we have not had the funds in our core funds to make those [later stage] investments when our companies reach the Series C stage,” he stated.
We used to provide some of our LPs with them as a co-investment. However, few organizations—especially financial institutions—are actually designed to invest directly in businesses. Thus, they were able to take part in the fund’s creation.
“This is a perfect mission for what they’re looking to do, to anchor new growth funds like this,” he continued, adding that one of the main instructions from the UK government to the British Business Bank is to address the later-stage shortfall in scale-up financing. Aviva is one of the parties that signed the Mansion House Compact. This has to do with putting some of the money from their pension fund into assets that will increase productively.
The liquid biopsy platform Inivata was sold to NeoGenomics for $390 million, the sound recognition developer Audio Analytic was sold to Novartis for $1.5 billion, the gene therapy company Gyroscope Therapeutics was sold to Novartis for $1.5 billion, and Zoetis acquired PetMedix, a pet treatment developer, for $285 million.
Cambridge is renowned for having produced a number of important businesses, such as Bicycle Therapeutics, Abcam, Darktrace, and ARM Holdings.
Key Cambridge, UK VC Launches $126M Fund to Stem Later-Stage Flight and Fuel Innovation
In a bold move to address the growing trend of later-stage startups seeking funding outside the UK, a prominent Cambridge-based venture capital (VC) firm has announced the launch of a $126 million fund. This initiative aims to retain high-potential companies within the UK ecosystem, ensuring that the country remains a global hub for innovation and technological advancement.
The Challenge: Later-Stage Flight
Over the past few years, the UK has seen a surge in early-stage startups, particularly in tech-driven sectors like artificial intelligence, biotech, and clean energy. However, as these companies mature and require larger funding rounds, many have been forced to look beyond the UK for later-stage investments. This phenomenon, often referred to as “later-stage flight,” has raised concerns about the long-term sustainability of the UK’s innovation economy.
The reasons for this trend are multifaceted. While the UK boasts a robust early-stage investment landscape, the availability of substantial later-stage funding has lagged behind. As a result, startups seeking Series B, C, or beyond have often turned to investors in the US, Europe, or Asia, where larger funds are more readily available. This not only deprives the UK of the economic benefits of scaling companies but also risks losing talent and intellectual property to other regions.
The Solution: A $126M Fund to Bridge the Gap
Recognizing this critical gap, the Cambridge-based VC firm has stepped up with a $126 million fund specifically designed to support later-stage startups. The fund will focus on companies that have already demonstrated strong product-market fit, scalable business models, and the potential for significant growth. By providing the necessary capital, the firm aims to prevent the exodus of promising companies and ensure they can scale within the UK.
The fund will prioritize sectors where the UK has a competitive edge, including:
- Artificial Intelligence and Machine Learning: Leveraging the UK’s world-class research institutions and talent pool.
- Biotechnology and Life Sciences: Building on Cambridge’s reputation as a global leader in biotech innovation.
- Clean Energy and Sustainability: Supporting the transition to a greener economy.
- Fintech and Digital Health: Capitalizing on the UK’s strong regulatory environment and market demand.
Why This Matters
The launch of this fund is more than just a financial injection; it’s a strategic move to reinforce the UK’s position as a global innovation leader. By addressing the later-stage funding gap, the VC firm is sending a clear message: the UK is committed to nurturing its homegrown talent and ensuring that startups can thrive from inception to IPO.
Moreover, this initiative has the potential to create a ripple effect across the ecosystem. Retaining later-stage companies means more jobs, increased economic activity, and a stronger pipeline of successful exits. It also encourages early-stage investors to continue backing innovative ideas, knowing that there is a clear path to scaling within the UK.
A Collaborative Approach
The VC firm is not acting alone in this endeavor. It plans to collaborate with other investors, government bodies, and industry leaders to create a supportive environment for scaling companies. This includes advocating for policy changes that make the UK more attractive to investors, as well as fostering partnerships between startups and established corporations.
Looking Ahead
The $126 million fund represents a significant step forward in addressing the challenges faced by the UK’s startup ecosystem. By providing the necessary resources for later-stage growth, the Cambridge-based VC firm is helping to stem the tide of later-stage flight and ensuring that the UK remains a fertile ground for innovation.
As the fund begins to deploy capital, all eyes will be on the startups it supports. Will this initiative mark the beginning of a new era for UK innovation? Only time will tell, but one thing is certain: the UK is taking proactive steps to secure its future as a global leader in technology and entrepreneurship.