Set for launch today (January 22, 2025) at RAEng by science minister Lord Vallance, the new Science and Technology Venture Capital Fellowship is a government-backed initiative designed to upskill investors’ knowledge and experience in the deep tech and life science sectors to stimulate investment.
“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,” Lord Vallance said in a statement.
Today’s launch follows the publication of State of UK Deep Tech report of 2024 by the Royal Academy of Engineering Enterprise Hub.
It found that Britain has seen a slowdown in overall venture capital activity in deep tech since 2022, but sectors like healthcare and AI continue to drive significant deals.
The report highlights that the UK faces a shortage of investors with relevant expertise to understand the fundamentals and potential of deep tech startups.
Deep tech companies are developing novel technologies that could transform the UK’s technological capabilities and global competitiveness in areas including manufacturing and materials; robotics, hardware and chips; networks; healthcare; energy; plus AI and computing. Deep tech 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 deep tech sector has attracted over £5bn in annual venture capital funding. However, 2024 presented significant challenges for startups seeking funding due to factors including higher interest rates, post-pandemic inflation and lagging productivity growth. Consequently, investors have become more risk averse, with late-stage deep tech companies being more successful in closing larger deals. The report notes an exception to that investment trend in AI startups.
Non-domestic investment into UK-based deep tech companies remains elevated, with firms from outside the UK participating in over 300 deals each year since 2021.
Mutual funds, family offices, and sovereign wealth funds have increased investment in UK deep tech and have been involved in over 500 deals since 2021. In recent years, private equity firms have been making more minority-stake investments in deep tech companies.
To reverse the decline, the Science and Technology Venture Capital Fellowship will provide tailored teaching, customised networking and access to industry leaders, with the aim of enabling more investment into the UK’s R&D intensive SMEs.
RAEng added that more venture capital investment is essential to supporting the development of businesses that will secure renewed economic growth for the UK, using deep tech to address challenges such as food shortages and natural disasters.
Sir John Lazar CBE FREng, president of the RAEng, said: “Deep-tech 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 deep tech 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 deep tech 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.”
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