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The era of technology and innovation in the UK?
26 January 2021
At the close of a year characterised by Covid, Brexit and economic uncertainty, Johnson took to the stage to posit British science and technology as a silver bullet for the UK economy. With the combination of an ‘unapologetically pro-tech government’ and greater regulatory freedom post Brexit, 2021 could mark an inflection point on the UK’s tech roadmap. But will Britain finally succeed in tapping its reserves to produce a flowing pipeline of tech unicorns, or is this just a pipe dream?
As a “Silicon Fen” tech entrepreneur-turned-investor, I have first hand experience of the UK’s struggle to capitalise on our extraordinary technology base and turn our multi-million pound businesses into multi-billion pound businesses. When I started out as an entrepreneur in the nineties, the aspirational career option was to be a banker and the idea that a 22-year-old techie might start their own company or commercialise their PhD research was out of the question. We were far behind our Silicon Valley counterparts. My cohort of fellow researchers just wanted to develop the smartest technology but were horrified when, once we had it, no one beat the path to our door. The mechanisms were not in place for us to pull together a team and find the funding that we needed to grow.
Since then, and due to some smart government interventions, the UK tech start-up ecosystem has gone from strength to strength and today leads Europe in terms of tech innovation and investment, with UK based start-ups having attracted capital funding worth $12.5 billion in the past 12 months alone, a sum that exceeds that of France and Germany’s combined. However, concurrently we have seen UK equity markets shrinking faster than any other European exchanges with the number of listed companies falling by a fifth since 2012. Furthermore, there are no advanced technology companies on the FTSE100. To retain our relevance on the global stage, Britain must nurture its tech assets to generate the giants of British business and harness the associated benefits of technical talent, spin-off start-ups and angel investors.
Our world-leading scientific research institutions have given rise to a strong pipeline of tech start-ups, but our late-stage tech ecosystem has been haunted by a recurring theme where the darlings of British tech are frequently snatched from the nest by foreign investors and the UK capital market has historically failed to attract major tech players. Laggard government policies, stringent listing rules and a lack of tech knowledge amongst UK financiers have deterred UK tech listings and enticed Britain’s rising stars such as Misys, Deepmind, Solexa, and most recently Arm Holdings to sell to foreign acquirers.
But we are now entering a new era. Post-Brexit Britain has the opportunity to move faster than its European counterparts and adopt forward-looking regulatory frameworks to facilitate innovation. The UK is finally recognising the strategic national importance of technical and corporate assets and the opportunities that they present for Britain on the international stage.
November 2020 saw the announcement of a long-awaited UK National and Security Investment Bill to better protect companies of strategic national importance from foreign acquisition, matching the likes of America’s CFIUS. Further tangible action such as a recently announced review of London Stock Exchange listing rules around dual-class share structures and free-float requirements demonstrates the UK’s commitment to building an ecosystem in which to grow multi-billion pound tech companies. And only a relatively small number of tech successes are required before all fund managers have to become tech experts and confidence in deep tech investment gathers momentum. At this point, the LSE will become an increasingly attractive option and the UK will begin to reap the benefits in terms of taxation, job-creation and continued relevance on a world-stage increasingly determined by technological assets and capabilities.
In 2012, driven by this vision for an ebullient British tech ecosystem and thriving technological innovation, I founded Invoke Capital, an investment firm which aims to productise and commercialise British tech research and build the billion-pound tech companies of tomorrow. Ten years later, I am seeing the results of this bear fruit as Invoke’s first investment, Darktrace, prepares to list on the London Stock Exchange. Let’s hope that it is the first of many fundamental technology companies to bet on Britain as the place to flourish.
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