There is a notable discrepancy in growth funding for later-stage startups between the UK and Europe compared to the US. The European Investment Fund indicates that the number of large venture capital (VC) funds in the US outnumbers those in Europe by at least seven times. In light of this, the introduction of a new growth fund in the UK carries considerable significance.
New Growth Fund from Cambridge Innovation Capital
Cambridge Innovation Capital (CIC), focusing exclusively on investments within the Cambridge ecosystem, has established a new ‘Opportunity Fund’ with an endowment of £100 million (approximately $126 million). This fund is primarily intended for growth-stage investments, further expanding CIC’s existing portfolio, which totals $757 million across over 40 companies, benefitting from a strategic partnership with the University of Cambridge.
The fund is financially backed by Aviva Investors and British Patient Capital and will specifically target investments in deep tech and life sciences companies at the growth stage.
Initial Investments
Thus far, two investments have been confirmed. The first is Pragmatic Semiconductor, a significant player in chip design and manufacturing with a total funding of $389.3 million. The second is Riverlane, which specializes in quantum computing error correction with funding of $120.7 million.
Investment Strategy
CIC’s new fund will consider investments of up to £20 million (around $25.2 million) in later-stage funding rounds for relevant companies in deep tech and life sciences sectors. The intention behind this initiative is to mitigate the UK’s persistent funding gap for later-stage startups, which often leads to a migration of these companies to other countries, predominantly the United States.
Government Initiatives
This funding gap is part of the rationale behind the UK government’s recent introduction of its “AI Action Plan,” which outlines various measures aimed at enhancing the economy through AI. The plan includes promises to foster Europe’s own “Silicon Valley” by enhancing the tech ecosystems surrounding esteemed institutions like Oxford and Cambridge. Additionally, the “Golden Triangle” comprising London, Oxford, and Cambridge will be supported with improved transport links and a funding package of £14 billion.
Andrew Williamson, Managing Partner at CIC, noted that the organization has historically concentrated on early-stage investments within Cambridge. However, he recognizes the maturity of several companies transitioning into more developed technologies.
Williamson explained, “Historically, what we’ve done is when our companies get to Series C stage… we didn’t have the capital in our core funds to make those [later stage] investments.” This led CIC to offer co-investment opportunities to limited partners, though many financial institutions are not structured for direct investments in companies. He remarked that the establishment of this fund addresses that limitation.
Supporting the British Business Bank
One of the directives from the UK government to the British Business Bank focuses on bridging the gap in later-stage scale-up capital. CIC’s new fund aligns perfectly with this mandate. Aviva, as one of the signatories of the Mansion House Compact, aims to allocate pension fund capital to productive growth assets.
Successful Exits
CIC has an impressive track record of successful exits, including the $1.5 billion acquisition of gene therapy firm Gyroscope Therapeutics by Novartis, the $285 million purchase of pet treatment company PetMedix by Zoetis, and the $390 million sale of liquid biopsy platform Inivata to NeoGenomics.
Cambridge is renowned for fostering notable companies such as ARM Holdings, Abcam, Darktrace, and Bicycle Therapeutics.
