London Calling…

When traveling last week to London, I was stuck by a number of public sector initiatives to drive entrepreneurial activity all across the UK (particularly in the life sciences) – or in other words to back-fill the gaps where the private sector was less than cooperative. It was a tricky few days to be in London as the English were struggling with the pending referendum vote in Scotland which, at 55/45 “No” for succession, hardly seemed like a resounding vote of support to stay united.

But first some context. The US life sciences sector is on fire right now. The NASDAQ biotech index is up 20% this year, notwithstanding Chairwoman Yellen’s complaints about over-extended valuations. There have been 43 US biotech IPO’s this year which have raised collectively ~$4 billion; the UK/European life sciences industry has seen only 28 companies ($1.4 billion raised) go public in the same timeframe. Arguably we are starting to (finally) see the commercial benefits of the litany of scientific advances of the past two decades take hold, yet that phenomenon is less evident across the UK and Europe. Maybe this can be attributed to differences in entrepreneurial fervor or hyper-charged incentive structures in the US which richly reward innovation. Either way the healthcare sector in the UK and Europe suffer from relatively frosty public and private capital markets.

This divergence is how I found myself meeting with the UK’s Financial Secretary to Treasury, Minister David Gauke, to review a series of initiatives launched in the UK to address the English version of the “capital gap.” The Minister opened the conversation by observing that the UK has successfully affected the “Wimbledonization” of their innovation economy, that is, they provide the place but not the players. After citing the requisite facts to underscore how closely aligned the US and UK are – 3.9 million travelers between the two countries every year, 1 million jobs directly attributable to bilateral trade – we explored more specific areas of collaboration and reviewed successful models of public/private partnerships.

With great fanfare, the UK has launched the Catapult Program which is comprised of nine innovation centers around the country which are structured along more specific technology initiatives. That afternoon I was fortunate to visit the Cell Therapy Catapult, which is a magnificent center at Guy’s Hospital in London. To date the center has received 70 million pounds of core funding to build 7,000 square meters of lab space and at capacity will house 100 scientists managing upwards of 30 research projects. The funding is one-third from each of government grants, collaborative R&D investments, and commercial “fee-for-service” revenues – quite a sustainable model.

Other Catapults include Precision Medicines, High Value Manufacturing, Satellite Applications, Connected Digital Economy (less obvious to me given all the start-up activity), Future Cities, Transport Systems, and Offshore Renewable Energy; it was this last one I found particularly fascinating as I listened to that team step through the market opportunity, again which the private sector has not entirely embraced – yet.

So I now think of a wind farm as another type of power plant – and it needs to be evaluated as such. Sheepishly the scientists at this Catapult acknowledged that at today’s pricing models, wind power may be consider uneconomic which is why the UK government has stepped in. Some fascinating facts as to where the UK stands today:

  • There are 1,000 wind turbines off the UK coast today
  • By 2020 they forecast that there will be ~3,000 wind turbines out there which means every two days a new wind turbine is installed
  • Which is now generating nearly 5% of the total net electricity consumed in the UK
  • And is also generating a lot of jobs – in 2007 there were 400 jobs attributed to Offshore Energy in the UK and by 2013, there were 18,000 jobs dependent on this emerging industry
  • Before a wind turbine is deployed there are 8 – 10 years of planning involved including environmental impact assessments

So as wind power becomes a significant reality, this model will have catapulted the UK offshore energy industry ahead in profound ways in a remote part of the country. So as the Clash so eloquently sang – “London calling to faraway towns…Come out of the cupboard, you boys and girls…”

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