Guest blog: Can the UK tech sector keep pace with the rest of the world?

by | 25 February 2013

Clive Mayne, Managing Partner at Exetec Consulting writes about how the UK is lagging behind the rest of the world when it comes to commercialising our technology innovations, and what can be done to change this.

Rightly or wrongly, a perception has emerged, in recent years, whereby entrepreneurs of growth companies in the UK technology sector, believe that seeking and obtaining investment, and the commercialisation of that technology, is getting far more difficult.

The widely held view amongst British industry practitioners, is that in order to seek the necessary funding needed for R&D, production and commercialisation, firms need to be based in the US where funding is readily available from investors who are less risk-averse and more in tune with IT and technological innovation.

While it is a matter of opinion as to whether this perception is correct, what does strike an accord is the concerns and widely held view that the UK is no longer at the forefront for global technology research and innovation - a cornerstone for driving economic growth.

During the opening ceremony of the London 2012 Olympic Games, the birth of the Industrial Revolution was played out to billions, reminding the world that Britain was once not only pioneering the growth of technology but also leading the way in its commercialisation. However, fast-forward to today and increasingly more and more innovations are being driven and developed outside our shores.

China, Japan, France and Germany have all identified key future technologies they see as underpinning the future of their economies, and have built strategies to capitalise on them. In the USA, the Obama administration has committed to producing a comprehensive technology and innovation plan, and has greatly increased funding for biomedical research, the physical sciences and engineering, and boosted support for high-risk/high-payoff research seen as having the potential to produce real breakthroughs.

With everyone else around us making strides, why is the UK holding back?

One of the biggest factors can simply be attributed to attitude. Bluntly put, the UK is much more risk averse when it comes to investment and, as a result, has a big fear of failure halting investment from entrepreneurs. In contrast, the attitudes from the US is to embrace risk which helps explain why Silicon Valley founders have on average started almost twice as many growth companies as founders in London. In fact, recent research from PwC into venture capital funding in the UK, identified that of 100 UK companies surveyed, 61 per cent agreed that negative attitudes in the UK towards failure discourage entrepreneurship.

The research also highlighted worries over UK innovation by the fact that only five of the top 100 computer science courses in the world are in the UK, whereas 19 of the top 25 are located in the US. Also, while international patent filings under the WIPO-administered Patent Cooperation Treaty (PCT) set a new record in 2011, helped by rise's of 33 per cent in filings from China and eight per cent from the US, filings from the UK fell by one per cent.

Another factor to consider, and one that has come in for criticism in the media, is the role played by education. Currently, there is a real skills gap within the UK with a decline in the number of people studying technology at university level. In 2003, 16,500 students applied to study computer science or IT first degrees; in 2007, that figure had slipped to 10,600. Though the latest figures have improved to 13,000 or so, the issue remains that Britain offers few global challengers when it comes to technology companies, and therefore restricting the scope for commercialisation.

As a result efforts need to be made to drag the UK back to the forefront of global innovation, but is the British Government sitting up and taking note?

At a first glance that sounds positive but putting in place a government department, committing of £200m initially just isn't likely to make much of an impact. In the UK we have a reputation for innovative technology design and we are still able to hold our own in that respect, however what often goes wrong is the environment to help that translate into a commercial success.

Arguably there are two key elements that would make a difference, the first being readily available early stage funding to support the development of the technology; this has become increasingly difficult as venture capitalists have to wait longer for an exit, often at lower multiples and are naturally more risk adverse and wanting more proof of success before investing. To change that dynamic needs some real encouragement for the investor community to take greater risks to get greater rewards not a new government department.

It is often quoted that in these difficult times it is the right time to start a new venture, we would argue that it's the right time for the government to create the right incentives for the people and investors with the skills and knowledge to help re-establish our leadership position in the world markets for technology innovation. Lets see some real efforts being made to drive innovation and commercialisation of the UK technology sector, not simply allocating the Boris Johnson's of this world some £100m and leaving them to work out what to do with it.

The second issue is the lack of experience in bridging the gap between great technology innovation and the commercial creativity to maximise its market potential. In truth this is probably the more difficult to achieve and what sets the US apart in that respect is that they simply have a more supportive environment for people to the take risks. In the UK most venture capitalists will concur that the experience and skills to position technology in the market place and drive commercial adoption of the products both at home and overseas markets is one of the biggest concerns when investing in a company and ideally want someone with the experience of having done it before. Of course that will only occur over time if the cycle of success can be ignited.

We strongly believe that the UK government should be taking significant action to create a supportive financial environment to allow those with the experience of building technology businesses to drive innovation and commercialisation of the UK technology sector, only time will tell if we've managed to keep pace with the rest of the world.

 

Clive Mayne, Managing Partner, Exetec Consulting

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