When the Prime Minister asked me to undertake a review of the Small Business Research Initiative (SBRI) last month I was delighted at the opportunity to help make this important lead customer programme work better for new science and technology based businesses.
SBRI gets science and technology businesses off the ground
Securing a lead customer, willing to fund part or all of the cost of developing a product to meet its own requirements, is a vital step in getting most new Science & Technology businesses off the ground.
UK’s most successful businesses first secured a lead customer
Indeed, many of our most successful companies are based, in different ways, on innovations funded by customers. They include Oxford Instruments and the five largest Cambridge firms started since 1970. Vodafone, the most successful UK start up since the second world war, was a spin out from Racal, first established as a two man consultancy developing and supplying specialist radio equipment for the MOD.
The same goes for the USA
And this is not just a UK phenomenon. The products on which the successes of Microsoft and Intel were founded were similarly funded through lead customers - IBM and Busicom, a Japanese calculator company, respectively. Bill Gates never had to raise venture capital.
Starting with a lead customer will create UK economic growth
So if we are to create the new R&D intensive, export orientated UK companies that we need to rebalance the economy and generate more high value employment opportunities, it is vital that both the private and public sector are encouraged to play this lead customer role.
Lead customer model allows entrepreneurs to retain ownership
Apart from helping new firms get to market, development funding from lead customers reduces the need for venture capital at the start, giving founders a better chance of retaining control of their businesses and pursuing a long term growth strategy, rather than having to make an early trade sale.
UK SBRI took inspiration from USA equivalent
I first became aware how much the UK needed the equivalent to the US SB programme about a year after 9/11. TTP Ventures, the VC fund I ran at the time had invested in a start up company specialising in terahertz imaging and spectroscopy. Its platform technology was getting traction from pharmaceutical and medical imaging companies. But it also had some potential for detecting concealed explosives.
There was a great deal of interest amongst the UK defence and security services in funding the development of a demonstrator to test out this application. But despite discussions with senior officials across different departments over a year or more, there seemed to be no suitable mechanism or budget they could use to fund the work they wanted. The company’s main US competitor had no such problem.
Building up UK SBRI
It was partly as a result of this experience that in 2004 I launched a campaign with the MP for Cambridge, Anne Campbell to get a US style SBRI established in the UK.
It took 5 years for an effective SBRI to get underway, but by 2015 annual SBRI spending had grown to around £75 million. This was in large measure due to the efforts of Innovate UK to promote it to spending departments and help them establish their own programmes. The value of the SBRI mechanism is now widely recognised across government and industry.
Private and public sector could use SBRI much more
Nevertheless, the target of £200 million a year set by George Osborne in 2013 has still not been achieved, and there are many departments that don’t use SBRI at all.
SBRI review – how to maximise its benefits for UK economy
The aim of my review is to examine how SBRI can be taken to the next stage, maximising the benefits for companies and government alike.
The Review team are keen to hear your views. The survey will be available on the BEIS consultation hub at Citizen Space shortly.
The Review is expected to be published at the end of February.
What is Small Business Research Initiative (SBRI)?
SBRI is a two stage, contract-based programme to fund the development of innovative technology solutions to meet government needs – either for departments’ own requirements or to meet policy challenges.
Phase 1 contacts are typically worth £50-100,000 and Phase 2 £250,000 to £1 million. Project costs are 100% funded. The UK SBRI is based on the US SBIR programme which has been running successfully for 35 years.
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