Cambridge Innovation Capital (CIC), traditionally known for its early-stage investment focus, has recognized a growing need within its portfolio companies for funding to support their scaling efforts. Many of these businesses, particularly in deep tech and life sciences, were seeking further capital to expand, presenting CIC with a dilemma: how to provide the necessary funding without deviating from the core focus of its existing fund.
As CIC Managing Partner Andrew Williamson explains, supporting scaleups with significant investments—such as joining a $200 million funding round—could result in an imbalance in the core fund, concentrating too much capital on growth-stage businesses. This led to a strategic decision: the launch of a new fund aimed specifically at addressing this gap.
Thus, the Cambridge Innovation Capital Opportunity Fund was born. With a £100 million budget, the fund is designed to support science-driven scaleups, helping bridge the financing gap between early-stage investments and the substantial funding required for growth. This initiative not only addresses CIC’s internal challenge of managing early- and growth-stage investments but also aims to play a role in alleviating a broader issue within the UK’s venture capital ecosystem.
The UK’s Growth Finance Gap
In the current landscape, early-stage UK companies are primarily supported by domestic investors. However, when it comes to raising larger sums for growth, a significant portion of capital—up to 90%—comes from international venture capital firms, primarily based in the US and Asia. According to Andrew Williamson, this reliance on foreign investors is less than ideal for the UK economy.
A 2024 report by the British Venture Capital Association (BVCA) and Beauhurst highlighted the increasing trend of overseas investment in larger deals. In 2023, 94.3% of deals worth more than $50 million involved foreign capital. The BVCA has called for more domestic investment to build a stronger UK-based VC ecosystem, with proposals to involve pension and insurance funds in the process.
However, this remains a work in progress. The current Labour government is pushing ahead with plans under the Mansion House Agreement to encourage pension fund investment in scaleups, with tangible results expected by 2030. Despite the slow timeline, the CIC Opportunity Fund is already demonstrating how UK-based institutional investors can support growth-stage businesses.
Institutional Support for Growth Businesses
The CIC Opportunity Fund is anchored by British Patient Capital, a division of the British Business Bank, and Aviva Investors, which has committed £20 million. Aviva’s involvement is particularly significant, as it represents how the insurance sector can play a role in scaling UK-based businesses even before the full implementation of the Mansion House Agreement.
For Aviva Investors, the scaleup space presents a valuable investment opportunity, as highlighted by Williamson. “The scaleup stage is an excellent place for investors like Aviva to contribute,” he said. The fund has already made its first two investments, backing Pragmatic Semiconductor, a company producing microprocessors from alternative materials, and Riverlane, which focuses on quantum computing error correction software.
The fund’s future investments will focus on deep tech and life sciences, key strengths within the Cambridge ecosystem. However, CIC is also broadening its scope, looking at opportunities across the UK, particularly in Oxford, London, and other regions.
Looking Ahead: Scaling the Ecosystem
While £100 million is a significant step, Williamson recognizes that it will take more to fully address the funding gap. CIC’s long-term plan includes launching larger funds in the future to further support growth-stage companies in the UK. The underlying issue, however, remains that the UK is skilled at producing innovative startups, but domestic funding at the scaleup stage remains limited.
To fulfill the potential of sectors like quantum computing and AI, while ensuring success stories stay within the UK, a more robust network of domestic finance providers will be needed. CIC’s Opportunity Fund is an important part of that conversation, marking a key step in the evolution of the UK’s venture capital landscape.
Related topics:
Arrowpoint Investment Partners Partners with SS&C for Fund Administration
Olam Group Shares Surge After Sale of Stake to Saudi Fund
ambridge Innovation Capital Unveils £100 Million Fund to Boost UK Startups
