Cambridge Innovation Capital (CIC) has introduced a solution to address a growing demand in the UK’s tech ecosystem: the newly launched Cambridge Innovation Capital Opportunity Fund. With a capital of £100 million, this fund is specifically designed to assist science-led scaleups, focusing on the deep tech and life sciences sectors.

The Need for a Dedicated Fund

As CIC Managing Partner Andrew Williamson elaborates, the firm, traditionally oriented toward early-stage investments, faced challenges as companies within its portfolio sought additional funding for scaling their operations. The substantial financial requirements for scaleups often conflicted with the fund’s core objectives, as large investments could disrupt the balance intended in their early-stage funding approach.

“Joining a $200 million funding round with a contribution of $20 million would have led to an over-concentration of scaleup finance in our existing fund,” noted Williamson. This realization prompted the creation of a dedicated fund to bridge the gap.

The Growth Finance Gap in the UK

Currently, early-stage companies in the UK predominantly receive support from local investors. However, as they transition to larger funding requirements, a significant portion comes from venture capitalists based in the United States and Asia. Williamson disclosed, “90% of investment comes from overseas,” which raises concerns about the national capacity for domestic investment.

Recent findings from the British Venture Capital Association and Beauhurst revealed that, in 2023, approximately 94.3% of deals surpassing $50 million involved international funding. This trend has significant implications, as reliance on foreign investment can potentially compel UK companies to relocate or list overseas, minimizing the economic benefits to the home market.

Government Initiatives and Future Investments

Addressing this concern, the UK government, following initiatives by preceding administrations, is endeavoring to enhance domestic investment through frameworks like the Mansion House Agreement. The aim is to galvanize pension fund investments in scaleups. However, as emphasized by Baroness Stowell, chair of the House of Lords Communications Select Committee, urgency is paramount: “2030 is all very well, but we need to accelerate the process.”

Pension Fund Contributions

The CIC Opportunity Fund exemplifies how pension funds can contribute to the scaleup funding landscape. It has been partially financed by British Patient Capital and Aviva Investors, which have committed £20 million and £15 million, respectively. Williamson stated that this involvement highlights the potential of the insurance industry to support growth businesses, paving the way ahead of the anticipated outcomes from the Mansion House Agreement.

Investment Focus of the Opportunity Fund

So far, the Opportunity Fund has initiated investments in two companies: Pragmatic Semiconductor, which specializes in producing microprocessors from alternative materials, and Riverlane, focused on developing operating systems for quantum computers. The fund’s future investments will prioritize sectors such as deep tech and life sciences, reflecting the strengths of the Cambridge University ecosystem while also considering opportunities in Oxford, London, and beyond.

The Path Forward

Williamson underscored that while the establishment of the CIC Opportunity Fund is a vital step, it is merely one component of a larger dialogue regarding funding in the UK tech ecosystem. The potential of domestic innovations in fields such as quantum computing and artificial intelligence can be better harnessed through increased local funding, helping entrepreneurs retain their businesses within the UK.