In his latest article on funding hi-tech firms, James McKenzie looks at the help on offer for businesses to innovate and grow
In 1978 the Silicon Valley entrepreneur Nolan Bushnell was fizzing with ideas for new businesses. He had just left Atari, where he had masterminded the creation of Pong – one of the earliest and most successful video games – and many other pioneering tech products. But one of the biggest problems with start-up companies, Bushnell realized, was the sheer amount of “bullshit housekeeping stuff” involved.
His solution was to create Catalyst – believed to be the world’s first hi-tech business incubator. “My idea was that I would fund [the businesses] with a key,” Bushnell told Fast Company in 2017. “And the key would fit a lock in a building. In the building would be a desk and chair. They would sign their name 35 times and the company would be incorporated. So in 15 minutes, they would be in business working on the project.”
Are you good enough to cross the valley?
The idea was not entirely new. The first formal business incubation service that I can find details of dates back to 1959 in the US, but Catalyst was geared specifically to the demands of hi-tech companies. So as well as providing fledgling firms with office space, IT systems and legal and accounting services, Catalyst offered laboratory space and most importantly money and support – in fact, Bushnell was often chief investor and chairperson of each firm’s board.
Catalyst was designed to help those companies get through the initial challenges of starting up. Within a year, it had funded 10 businesses, many of which were very much ahead of their time. They included Etak, which released an in-car computer navigation system in 1985 – fully four years before the GPS network was available for civilian use. Parts of the press ridiculed the product (it didn’t help that the symbol of the car on the driver’s screen looked uncannily like the ship from Atari’s Asteroids game) but sat-navs are now a feature of almost all modern cars.
Catalyst folded but the blueprint for business incubation had been set
James McKenzie
Catalyst created around 20 companies, but it unfortunately over-invested in some of them, which therefore took a lot longer than expected to generate a return. Eventually, in 1986, Catalyst folded but the blueprint had been set and by 2006 there were more than 1400 incubators of all kinds in North America, up from only a dozen in 1980. A report that year from the US National Business Incubation Association indicated that US incubation programmes had helped more than 27,000 companies, together employing over 100,000 people and generating annual revenues of $17bn.
Global growth
The idea quickly spread across the world as more and more start-ups saw the benefits of lab space, help, advice and access to capital. In 1997 there were around 25 incubation environments in the UK, but by 2017 that number had risen to almost 400, according to a report from the Department for Business, Energy and Industrial Strategy.
With hi-tech incubators and accelerators usually needing specialist facilities, many are located at (or linked to) universities and other national labs in areas where there are lots of similar companies with a local talent pool. The Institute of Physics also has a business accelerator at its new headquarters, giving small firms access to affordable office space in central London and letting them hook into the IOP business and member networks.
As well as many business incubators, the UK now in addition has the Catapult Network of technology innovation centres. These have been set up over the last decade in the wake of a 2010 government report into technical innovation. Written by Hermann Hauser – the physicist-turned-entrepreneur and honorary fellow of the IOP – he reckoned that the UK has a science capability second only to that of the US, but was falling short on translating scientific ideas into leading positions in new industries. “Technology and Innovation Centres can help solve this shortcoming and give Britain the lead in some of the most promising technologies leading to new industries with transformational economic impact,” he wrote.
The Catapult Network, which is part of Innovate UK, now has nine technology and innovation centres spanning more than 40 locations across the country. These centres cover everything from compound semiconductors, renewable energy and high-value manufacturing to satellites, energy systems and digital technology. They provide high-quality facilities for hi-tech businesses of all sizes and have a support programme for start-ups and small-to-medium-sized enterprises (SMEs). Since 2013, more than 8000 start-ups and SMEs have been supported. Innovate UK also offers grants to support its industrial strategy, with various competitions running throughout the year.
How to persuade a venture capitalist to fund your business
So whether you are an early-stage firm, a pre-seed innovator, or a more established company, there are many networks and resources to support your innovation journey. A good place to start is the Knowledge Transfer Network, which has experts in many areas on tap. There is also Innovate UK Edge – part of UK Research and Innovation – which has business advisers who can provide advice and introductions. In addition, it can carry out a grant-funded audit of your firm’s intellectual property. It even has an “investment readiness” programme as well as a showcase called Pitchfest to help you improve your pitch to investors.
There is now more help than ever for new hi-tech start-ups
James McKenzie
I know from personal experience that starting a new hi-tech firm is not easy and many physicists have great ideas but are unwilling to take the plunge. But there is more help on offer than ever before: through business incubation, catapult networks, grants and business advice. So why not have a go? Whether it’s energy, medicine, quantum tech or new materials, there are plenty of opportunities.
