Crossing the Valley of Death

Serial entrepreneurs are generally great at developing new technologies – but woeful when it comes to translating these innovations into commercial success stories. Venture capitalists call this ‘crossing the Valley of Death’. It continues to be a major barrier to the success of the electronics industry – a challenge that successive governments seem to embrace and then file under ‘too difficult’. With a new government now in place, we must address this recurring blight on the industry’s growth potential.

Back in 2013, more than 130 industrialists, entrepreneurs, companies from start-ups to multinationals, funding bodies and other organisations all gave evidence to a UK Parliamentary Science and Technology Committee investigation into the Valley of Death. Those with long enough memories will remember that this was the era when Vince Cable was Business Secretary – pledging ￡67m of funding a year later to bridge the gap between R&D and commercial success.

Since then, very little seems to have happened. In fact, raising meaningful funds for things like novel electronics components, chips or antenna development, and even full electronic products is even harder, as investors (typically venture capitalists) are more risk averse, typically expecting to see a return on investment within just three or so years.

With a new Labour government in place, there is an opportunity to reset our funding model. Not that our current funding system is broken – Novocomms Limited is currently developing electronic communication products containing its own antenna technologies with the support of an SBRI contract– it could just be improved.

While Innovate UK provides grants to cover the Valley of Death period, all too often funding electronics projects in the UK is relatively small and short-term. Conversely, my experience in the US suggests that while VC funding is more difficult to secure, it does recognise the need for longer-term support to bridge the gap to reach market commercialisation.

In my role as an angel investor, I work with several UK electronics businesses, all developing world-leading technologies that could be used across the globe. However, it’s about funders’ confidence in the sector and the technology. If we do not have experienced people working in government and financial institutions who really understand the electronics or manufacturing sector, they are unlikely to be able to make informed decisions on long-term funding of projects.

What I’m advocating is for the likes of the government (through Innovate UK ) and VCs to take on more risk and be prepared to fund projects through to the Valley of Death stage, when expensive elements such as more people, equipment and marketing spend come into play. In short, they need to have a clear strategy (i.e. an industrial strategy for the UK to include sectors such as electronics) and an ability to assess risk and reward in an informed way. We need engineers and manufacturers to be involved in the funding decisions to do this. This way, we, as a country, can focus funding on projects which are more likely to be successful.

So far, our new government seems to understand the importance of appointing ministers (or advisers) with genuine experience in their respective fields. Here, I am thinking about James Timpson as Prisons Minister and Mark Carney as adviser to Rachel Reeves, who herself has experience working for the Bank of England. Surely, it’s time we had experienced engineers driving our industrial strategy and helping to pick winners.