Duncan Lindsay reflects on the significance of the Cambridge ecosystem and deep tech for the UK economy and highlights the pitfalls that start-ups should watch out for.
Looking back on this year’s highlights, one of which was the outstanding Cambridge Tech Week event, the enduring brilliance of Cambridge stands out as being an exceptional hub for enterprise.
Cambridge combines deep tech innovation within a vibrant ecosystem that nurtures new ideas and cultivates collaboration, driving new business growth.
What is deep tech and why does it matter to the British economy?
Start-up companies rooted in scientific research and advanced engineering are often referred to as ‘deep technology’ or ‘deep tech’ companies. They tackle some of the world’s most complex problems by leveraging cutting-edge advancements in areas like artificial intelligence, quantum computing, biotechnology, and nanotechnology. Their efforts focus on tackling critical issues and difficult challenges, such as climate change, circular economy, and healthcare.
These companies are pivotal to the British economy as they drive innovation, create high-value jobs, increase productivity, and maintain the country’s competitive edge. The UK Research and Development Roadmap sets out government’s commitment to increasing R&D spending to 2.4% of GDP by 2027 reinforcing the critical role of innovation-led industries in shaping the country’s future.
However, deep tech companies typically operate on longer timescales than traditional companies – their ideas and products might take a decade to reach the market. This extended timeline demands perseverance from entrepreneurs but the rewards from their work can be significant, with a continuous pipeline of innovation generating defensible intellectual property, significant industry and societal impacts as potential outcomes if done right.
The power of public-private partnerships
For investors, patience is more than a virtue, it’s an essential trait. But investors also need flexibility and adaptability during the critical early years – business plans will change in response to the results of research and innovation. Yet the rewards for investors can also be extraordinary, both in financial returns and impact in line with their investment strategy and objectives.
To help investors navigate uncertainty, public-private partnerships play a vital role by sharing the risks of early-stage investment. Support from government can be in the form of business and research grants, loans, investments, tax incentives, the ‘patent box’, the support of academic research collaboration, development of industry networks and support for export activities. These vital contributions from government provide a support network around the start-up that can reduce risk and improve confidence for investors.
The concept of a Unicorn, and a British success story
In the start-up world, a ‘unicorn’ is a privately held company valued at $1 billion or more. Achieving unicorn status is a significant milestone that indicates a start-up’s potential to dominate its industry.
But it can be a long and challenging journey. One of the most remarkable British success stories is ARM, a British start-up that has now achieved global recognition for its pioneering contributions to semiconductor technology.
ARM was founded in Cambridge in 1990 as a spin-off from Acorn Computers. Acorn itself was founded in 1978 – in a barn near Cambridge – and went on to develop the BBC Microcomputer. The initial project for ARM was the development of a processor for Apple’s Newton computer system. Today, ARM CPU core designs are powering billions of devices globally.
The company was acquired by SoftBank in 2016 for $32 billion, underscoring the immense value that technology-driven start-ups can generate. ARM exemplifies the transformative potential of British innovation, born from modest beginnings and growing to leave a lasting global impact.
The Cambridge ecosystem: a fertile ground for start-ups
Nicknamed ‘silicon fen’, Cambridge thrives as a centre of innovation for advanced technology, thanks to a world-renowned university and vibrant entrepreneurial culture. The University of Cambridge provides a steady stream of talent and ideas, fuelling the growth of the local start-up ecosystem.
The Cambridge investment scene is teeming with venture capital firms, angel investors, and corporate partners actively investing in early-stage companies. Local companies such as Amadeus Capital Partners, Deeptech Labs and Cambridge Innovation Capital maintain a focus on the region and continue to support the deep tech that emerges here.
The academic environment in Cambridge also fosters entrepreneurship, knowledge sharing and collaboration. Initiatives such as the Anglia Ruskin Enterprise Academy, Cambridge Enterprise and the Judge Business School play a pivotal role in cultivating a thriving ecosystem.
Who are the rising stars?
Paragraf and Pragmatic Semiconductor are prime examples of UK start-ups shaking up their industry today.
Pragmatic Semiconductor is in growth mode having secured significant investment to scale its operations and commercialise its innovative flexIC technology. FlexICs are thin, flexible integrated circuits that can be produced at a fraction of the cost of traditional silicon chips.
This innovation unlocks a wealth of possibilities, from powering the Internet of Things (IoT) and smart packaging to advancing wearable technology, with the potential to connect trillions of everyday objects to the digital world.
One of the most significant milestones in Pragmatic Semiconductor’s journey is the recent establishment of their 300mm fabrication facility in County Durham. This state-of-the-art manufacturing plant is dedicated to producing flexICs on a larger scale, a major step forward in meeting the growing demand for flexible electronics.
The facility is expected to be a game-changer for the semiconductor industry, helping to reduce costs, broadening the application space and make the technology more accessible. Pragmatic Semiconductor’s innovations are crucial for the future semiconductor industry and the broader UK economy.
Paragraf was founded in 2018 as a spin-out from Cambridge University and aims to commercialise graphene-based technologies for advanced electronics. The company has developed a ground-breaking method to produce high-purity graphene directly on semiconductor-compatible substrates. This innovation overcame longstanding challenges in scaling graphene production and integrating it into standard manufacturing processes. Renowned for its exceptional electrical and thermal properties, graphene holds immense potential for transforming the semiconductor industry, and Paragraf’s advancements have unlocked new possibilities for its practical application.
Its graphene-based devices, such as Hall-effect magnetic sensors, deliver unmatched sensitivity and efficiency. Applications for these devices span healthcare, automotive, and aerospace sectors, as well as quantum technologies. The company also explores next-generation transistors, addressing the demand for faster, smaller, and energy-efficient devices.
By bridging the gap between cutting-edge material science and practical solutions, Paragraf is driving transformative innovation and positioning itself as a leader in the future of semiconductors.
Contribution of deep tech start-ups to achieve Net Zero
Deep tech start-ups are at the forefront of the fight against climate change, particularly those emerging from the Cambridge region. Echion Technologies, for example, is focused on advanced battery materials that can significantly enhance the performance and sustainability of electric vehicles.
Xampla on the other hand is developing natural alternatives to single-use plastics, contributing to reducing plastic waste and carbon emissions. These innovations are not only crucial for reducing carbon emissions but also represent significant economic opportunities for the UK.
Scarce resources
Besides blood, sweat, tears, and perseverance, start-ups rely on investment for resource and the delivery of their plans, but it is scarce. Although learning can be had from making mistakes, expensive lessons should be avoided if possible.
Keeping in touch with a dynamic business plan and understanding the challenges ahead are crucial to staying on track and limiting the cost and consequences when things don’t turn out as planned.
Experienced advisors and consultants like 42T can provide an independent and objective viewpoint for start-ups, which enables unbiased identification of solutions to complex problems, and a real-world view of the technology, its value proposition, customers, market fit and positioning.
This could include changes to business strategy such as ‘pivoting’ in response to unexpected developments. They can also help start-ups to avoid common pitfalls such as:
- The Minimum Viable Product (MVP) is intended for customer development, and addresses market, rather than technical, risk. While it can seem a more efficient use of limited resources to combine market and technical development programmes, forcing the two together often results in wasted effort on dead-ends.
- Start-ups may get distracted by the needs of early customers, finding out too late that they may not be representative of the broader market
- Leaders can concentrate on the issues they see in own areas of expertise, neglecting the unfamiliar technical or business risks until it is too late
- Entrepreneurs can become over-enamoured with untested routes to market, failing to recognise the value inherent in the existing supply chains. Genuine market disruptors almost always need a deep understanding of how a market works in order to succeed
- Start-ups cannot afford to bury mistakes and yet must make decisions on incomplete information. What makes this worse is that most of us are great at justifying past decisions, without noticing that the assumptions behind them have changed. Decisions should be made anyway, but a record should be made of the reasoning and assumptions so it is easier to spot when a decision should be revised because circumstances have changed
- The initial product is likely to be wrong in some way. Locking in design decision early, such as over-optimising for volume cost, makes it harder to make changes later and can cost far more in the long run. Robust update means, and a flexible design approach, are essential to allow the product to evolve with understanding of the market
- Start-ups often underestimate the challenges of scale-up, particularly the expected timing is always wrong. Transitioning from prototype to mass production requires not only planning, but also regular review and revision of these plans. Above all, building relationship capital with your CM is essential
Expert innovators driving start-up success
Cambridge’s unique combination of academic excellence, entrepreneurial support, and investor expertise creates an environment where ground-breaking technologies can thrive.
As an integral part of the Cambridge technology scene, 42T is a product design and innovation consultancy helping to create innovative new products and manufacturing processes for some of the world’s best-known corporations and brands, as well as start-ups and SMEs, working across all sectors and specialisms.
Let us help you