Spotlight on Spinouts 2024 Insights | Chris Reichhelm

Join us for the debut episode of ‘Lab to Market Leadership with Chris Reichhelm, CEO of Deep Tech Leaders, as we dissect the data from the Royal Academy of Engineering’s 'Spotlight on Spinouts 2024' report. Discover our unique analysis shedding light on why UK startups encounter commercialisation challenges despite their innovative ideas. In this episode, we provide a fresh perspective on the data, revealing insights that illuminate the problems these companies face. Stay tuned for future episodes featuring interviews with industry experts, including investors, CEOs, and policymakers. Essential listening for those navigating the journey from lab to market!

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Podcast Production: Beauxhaus

Chapters

• 0:00 Chapter 1: Introduction to Spotlight on Spinouts 2024
• 2:34 Chapter 2: Analysis of Fastest Growing Spinouts
• 5:35 Chapter 3: Reflections on the State of Innovation in the UK
• 10:53 Chapter 4: Introduction to Deep Tech Leaders Podcast

Transcript

[00:00:00] So here's the thing. I am looking at the Spotlight on Spinouts 2024. a report that is produced every year by the Royal Academy of Engineering and Beauhurst, a research group. And as the title suggests, they conduct an annual review of advanced science and engineering spinouts from universities and other research institutes, mostly universities, highlighting some general data and the health of this as a company category.

Spinouts, as we know, are critical for the development of novel science and engineering. And, uh, this is a report I have followed for the last two or three years. Every year, I go to the same section, and that [00:01:00] is, I go to the same section immediately, I should say. I consider the entire report, but there's one section more than any other that is the most interesting to me.

And that is, the fastest growing spinouts, because the fastest growing spinout should be an indicator of how well advanced science and engineering startups are progressing, how many of them are commercialising. Now, a few caveats before I get into this. Number one, these are private companies. They don't have to report their numbers. That's understandable. Uh, Beauhurst is a, is a fine research group. Very good at what it does. Very focused too on the technology and science sectors, which is great. So if anyone in the UK knows how to collect this information, it's these guys. We can trust them. That [00:02:00] being said, I look at these numbers here and I'm shocked.

The fastest growing company in the UK, sorry, the fastest growing spinout, advanced science or engineering spinout in the UK is a company called Alloyed. Alloyed is a client of ours, they have been a client of ours, and there, it says here, this is public information, their compound annual growth rate is 135%, which is, which is very good, very impressive.

And their turnover for the year 2023 was 6.68 million, which again is fine. It's good turnover. The company has been around for a while since 2017. So seven years and they've gotten revenue to 6.68 million. The second fastest growing advanced science and engineering company is a company [00:03:00] called Phoremost with compound annual growth of 92.3 percent and turnover for last year of £473,000. They're in the life science space. Abselion and Monirail round out this four company list and they each share the same compound annual growth rate of 71%. Okay. And they don't report their turnover. Again, they don't have to, but these numbers, this is for the entire UK. This is the Royal Academy of Engineering. This is Beauhurst. These are very fine institutions. And the question that occurs to me is, is this the best we've got? Not mock, not, you know, no criticism at all of these companies. That's not the point of this. These companies are fine. They're growing. They've [00:04:00] been, you know, they're the ones that have been identified. That's great. No criticism at all. But throughout the entire United Kingdom, is this the best we've got? If we've, if we were to make everyone's information public, all the revenue information, all the compound annual growth rates, if we were to make all of that public, would we see very different results, or would they be a lot like this?

Because to read the rest of the report, to glance at it even, it's clear that most of the advanced science and engineering spinouts, startups, are still at the very, very early stage. And some of them have been at that very early, early stage for a long time. So that tells me something, [00:05:00] and it may tell you something too.

And the thing it tells me is that we're not very good at progressing these companies. We're not very good at developing advanced science and engineering companies. We're very good, exceptionally even at developing advanced science and engineering, but we're lousy at developing companies that can be commercialised.

Now, for as long as I've been in tech, and that's going on nearly 30 years, the same thing has come up about the UK, the country in which I live, country which I love living. As the accent suggests, I'm not originally from here. It's a country I moved to many years ago and I continue to love. Huge amount of potential, especially in these areas, but we're not getting very far.

If this, these kinds of results represent the best of what we can do, [00:06:00] this makes for depressing reading, and I believe something needs to be done about it. So, I'm not the only one, by the way, that believes something needs to be done about it. Lots of people are trying to do great things about it. There are lots of wonderful initiatives.

Everyone's trying to to deliver the very best of what they've got in these sectors to improve these results. But I think nevertheless, we have to acknowledge that this is, is this an indicator of the best of what we've got right now? Because it is, that's depressing. And then we have to look at the things we're doing and the advice we're giving and, uh, and the expectations we've got on the people that are involved in these sectors.

And we have to have some very serious reflection and conversations. I run a business called Deep Tech Leaders. [00:07:00] We build boards and leadership teams for advanced science and engineering companies, deep tech companies. Our focus is on trying to get them from lab to market, trying to progress them along the journey. And I've, uh, I've advised advanced technology companies for nearly 30 years.

I've worked with startups for over 20 years and very focused on spinouts in particular since 2011. I know how difficult it is to move a company from one end of the journey to the other. I've seen very few companies do it really well. It is hard. Pushing the boundary of science and mathematics and engineering is very hard, and coordinating that effort with a commercial plan that involves strategics, that involves different sources of capital, timing that with a market is, is very, very difficult.

But a [00:08:00] lot of that, nearly all of that comes down to the management of the business. It's not the innovation. It's not the science or the engineering. It's the management of the organisation. And I think there is something missing from the conversation, which is the understanding of what happens on these journeys, the lab to market journey.

What are the phases? What are the stages? What are the milestones? of these critical journeys, because every single one of these companies is going to go through this lab to market journey. No one gets out of it. No one's allowed to get out of it. You want to deliver an innovation from lab to market.

You're going on the lab to market journey. You don't get to shortcut it. It doesn't work that way. It's not like in software where you can actually shortcut a lot. And actually the route is to shortcut as much as you can. In these areas, you don't have that luxury. You've got to [00:09:00] go on that journey.

And if we're going to see more success, we have to study that journey more. And that is the whole entire purpose of this podcast, to study the lab to market journey, to get granular with it. Now we're going to do that in a couple of ways. Number one, we're going to speak to individuals who've actually been on it and who've made it, and I want to learn from them not how great their technology was, not how innovative their solution could have been.

I have no interest in that. There are lots of other great podcasts that do that, by the way. Listen to them if you're interested. This isn't going to be one of those podcasts. The only thing I'm interested in is an understanding of the management decisions actions, compromises that were made along that lab to market journey.

How [00:10:00] did people, and it is people, how did people and how did teams get from point A to point B and so on? I want to understand that and the finest level of detail that we can. I also want to speak to corporates, to executives at corporates, because they have such a critical role to play in the lab to market journey.

They are sponsors. They can be investors and of course they can be customers. I want to hear from them. What are the frustrations? What are the challenges they see constantly when they're engaging with these kinds of companies? What are the lessons they have for people that are on this journey or are thinking about going on this journey?

I want to talk to investors. Do they fully appreciate this journey? Do they? What kind of support are they giving along this journey? How [00:11:00] deep is it? There's a limit for many, particularly in the venture capital world, to the level of support that they can provide, especially as we advance along the TRL journey.

If you're going to be scaling up to bigger and bigger plants and first of a kinds, there's going to be a limit to how much of that can be supported with equity. So I want to understand that. And finally, I also want to understand policymakers. Policymakers have a huge role to play. They create the overall environment.

With the right policies in place, people will build. Look at the US. You look at what the Biden administration has done in terms of putting in place the infrastructure, the capital, and the general environment that encourages people to build. We're spending a lot of money to do it, and that may come back and bite us later on, but there's no [00:12:00] denying that it's having an effect.

And so policy has a huge role to play as well, and I'm going to seek to understand that too. So if you are an innovator, not an inventor, if you're an innovator who dreams of delivering their innovation from a bench to a market where someone is paying for your solution, and you have a technology and product roadmap with other innovations and other solutions behind that, you have a sales organisation, you have a customer success organisation, you have a scale and engineering organisation, you have a technology R&D organisation.

You have production and supply chain and quality, all of these different areas. This sounds like you or considerations that you have [00:13:00] to plan for. You need to listen to this podcast. You're going to learn something here. If you're a stakeholder that sits around these types of organisation, an investor, a policymaker, a corporate, and if you want to learn more about this, you need to listen to this podcast.

I hope you'll join me.