Innovation UK > News > Innovation blog > Research with enterprise

It would be hard to miss the media blitz surrounding the 350th anniversary of the UK?s leading scientific academy, the Royal Society, but one of its newer activities is playing it low key. Now just two years old, the Royal Society Enterprise Fund is quietly conducting its own experiment in how to fund innovation that is struggling to escape from the laboratory into the market place. It made its first investment about a year ago.

The shortage of finance for even the best ideas ? now even harder thanks to the economic meltdown ? is one reason for questioning the old argument about the UK being good at science but bad at turning it into profitable businesses. Old-school scientists generally shunned commercialisation, but younger researchers are happier to think money. When they try, though, many can't get the backing they need to turn ideas into technologies and products.

The Enterprise Fund set out to address this need. It asked a select band of wealthy individuals who had already made it big in technology to chip into the fund. The idea proved so appealing that the Royal Society quickly raised £6½m.

The fund sits in the all-important gap between angel investors and venture capital funds. Angels, individuals with deep pockets, don't mind putting five-figure sums into a business. Venture funds prefer talking in millions, partly because of the effort that it takes to pick over the entrails of businesses seeking money. The real need is to plug this ?seed funding? gap, after the angels ? and sometimes the founders? friends, family and credit cards ? have done their thing and before a company is big enough to appeal to the venture funds.

Dr Andrew Mackintosh, the Enterprise Fund?s Chief Executive, sees this as a significant investment gap. ?Getting that first-round money is really really difficult,? he says. The credit crunch has made it even harder since the Royal Society (RS) first cooked up its idea. ?Apart from the government and regional funds virtually nobody is doing seed funding,? says Dr Mackintosh.

So far, the fund has invested in three businesses, to the tune of around £250,000 each. The first investment, Novacem, which is developing ?carbon negative? cement technology, has already picked up a handful of awards and, in the week of the Royal Society?s birthday bash on London?s South Bank, signed a development deal with Lafarge, ?the world leader in building materials?.

The idea behind the Enterprise Fund was to do more than raise money for technology start ups. The RS also wanted to change opinions, especially among the Fellows of the Royal Society, some of whom hark back to the era before it became not just respectable, but positively fashionable for researchers to make money out of science.

Is it working? Andrew Mackintosh thinks so. People keep knocking at his door looking for backing. The fund has looked at more than 200 proposals so far.

A lot of the fund?s appeal, says Dr Mackintosh, is down to its nature. ?This is a commercial fund,? he insists. It has to be if it wants to maintain the flow of money into businesses. But the fund isn't there to enrich backers, shareholders or anyone else for that matter. It is an ?evergreen fund?: money it makes goes back into the fund to support future generations of start ups.

?It is a very powerful model,? says Dr Mackintosh. An evergreen fund appeals on several fronts. The people who donated that first £6½m like the idea that their money will keep on working. Surprisingly, the evergreen concept also appeals to perhaps researchers seeking funds. ?Academic founders particularly like the idea of us recycling our money,? says Dr Mackintosh.

It seems, then, that researchers retain some of the old suspicion about making money for the sake of making money. But they don't mind taking your money if you offer them a deal that recycles the profits and that could bring further benefits to the community in an ever larger fund that will back researchers who come after them.

Michael Kenward