Make sure UK proof-of-concept funds go beyond Golden Triangle, say experts

The limited pot of proof-of-concept funding recently promised to universities by the UK government must be distributed to institutions beyond just the Golden Triangle of Oxford, Cambridge and London, say experts.

Last month, UK chancellor Rachel Reeves announced the government would allocate £40m ($50m) for proof-of-concept funding to be deployed over five years. It expanded a promise by the previous government to deploy £20m over three years — a commitment made after the publication of its Spinout Review a year ago.

The UK lags behind other countries in how much its government provides for funding to prove that university research is commercially viable. The so-called proof-of-concept funding is a critical first step before a spinout is created from academic research and is needed to attract investors. Countries rely on government funding for proof of concept because the private market tends not to see the commercial benefit of funding it.

The extra money that the UK government has pledged is widely regarded as insufficient. The need is closer to £110m a year, says Simon Hepworth, Imperial College London’s director of enterprise, who calculated with peers at other institutions the larger amount.

But given the UK government is unlikely to provide more funding for now, measures should be taken to make sure the amount available is spread evenly across the UK. Most VC funding for spinouts is channeled towards universities in Oxford, Cambridge and London universities, with the rest of the UK lagging behind.

Anne Lane, chief executive of University College London (UCL)’s commercialisation subsidiary UCL Business, argues that projects should be judged without the university name attached to avoid any unconscious bias. She thinks the money should be administered centrally but adds the challenge with this approach will be the need for the allocations to be done at pace. “No academic is going to spend a lot of time and jump through a lot of hoops for, say, £50,000,” she says.

UCL is in a better position than many of its peers with regards to proof-of-concept funding: UCL Business has a £7.5m pot, set up with money generated from the acquisition of spinout Senceive, a wireless remote monitoring technology developer, by industrial technology group Eddyfi/NDT in 2021. “Senceive had £35,000 of proof of concept funding,” says Lane — money that came from UCL Business’ balance sheet — showing just how big the return can be for a university.

She hopes that UCL’s internal proof-of-concept funding will continue beyond the deployment of the initial £7.5m but acknowledges that it will depend on whether the university requires more money for other areas and how successful this initial pot of money turns out to be. “At the moment, they have been very forward-thinking,” says Lane.

UCL also has access to proof-of-concept funding through the UCL Technology Fund, where 10% of the money was set aside for this purpose. But the fund is due to wrap up in 2025. It will be replaced by a multi-university fund dubbed London Atrium and Lane hopes a similar proof-of-concept provision will be part of that vehicle.

David Coleman, chief executive of tech transfer office University of Birmingham Enterprise, says the proof-of-concept funding is a unique opportunity to show that it isn’t just universities in the Golden Triangle that can deliver commercially relevant technologies. “I’m not saying it should be closed to the Golden Triangle universities because we want to fund great innovations, but equally we need to show the impact it has in other regions that don’t have the same level of early-stage investors or risk-takers.”

Coleman agrees that university venture funds, like the UCL Technology Fund or, in Birmingham’s case, Midlands Mindforge, a joint spinout fund set up by several universities in the UK’s Midlands region which is still fundraising towards its first close, can fill some of the gap but cautions that “it’s not going to support it all itself — there has to be other money in the system”.

The UK’s commitment is tiny by international standards

To give the UK government’s commitment an international context: the five universities in Belgium’s Flanders region have access to €45m of proof of concept funding per year from the local government, says Paul Van Dun, general manager of tech transfer office KU Leuven Research and Development. That’s roughly five times as much as 166 British institutions now have access to.

In Flanders, projects are selected by a committee of industry and university people, explains Van Dun. Hepworth is keen for the UK approach to work similarly. “Universities need to allow investors to come into that decision-making,” he says.

The process will need to be completely transparent

Lane, Hepworth and Coleman agree that tech transfer offices need to be involved in the distribution of the funding. There has to be “some holding to account the scientific researchers that they deliver what they said they would. A lot of science, rightly, is around curiosity but this bit of it cannot be. This bit of it has to be around a specific goal, which is not always the natural way of working for some scientists,” says Hepworth.

Tech transfer offices should provide “proper, tangible support” to proof-of-concept projects, says Coleman. “There aren’t going to be that many projects funded and, therefore, it’s in all our interests that we give this a good shot. I hope Birmingham projects get funded but if it means that they don’t because there are better projects from other universities, so be it. We have to show that this works.”

The process needs to be transparent around what is funded and why, or why a certain project is rejected, Coleman says. “If you are asking industry and investors what they think of a project and it isn’t going to be investable as a spinout, then it’s important that the university understands that.”

Such bad news can be a good thing, Coleman says. “In some ways, it can be worse when a project is offered some support and it isn’t sufficient, and it’s clearly never going to be sufficient. It is better to have the difficult news because there is only so much resource to go around. I know the government and the universities want more spinouts but what we really need is more quality spinouts.”

What’s next?

Lane thinks there should be a review at the end of the five-year period but perhaps also halfway through. She hopes that findings will show the money is going to universities throughout the whole country. “One, that would show that research across the country is excellent, which I think it probably is. Two, it shows that other universities can do this just as well as the golden triangle universities — maybe it’s just a volume thing,” she says.

Coleman agrees: “Ultimately, this will need a big pot of money, but you have to start somewhere. We will be using this first £40m to show what is feasible and to demonstrate it can have impact. And yes, it may well expose some areas of particular difficulty as well — let’s expose them.”