Tech start-ups: How to secure government funding

Nigel Walker of the Technology Strategy Board outlines its start-up funding options and what tech entrepreneurs need to do to secure backing

Last May, UK innovation agency the Technology Strategy Board announced that it had budgeted a record £440m to support innovative businesses and growth across the UK.

When outlining the UK’s 2013-2014 Delivery Plan, universities and science minister David Willetts confirmed that the funding boost represented an increase of more than £50m up on 2012. This funding will drive growth to keep the UK at the forefront of innovation.

Identifying that much of this growth will come from the UK’s start-up market, we declared that 60% of this funding would go to small and medium-sized businesses.

The Delivery Plan set out to invest over £300m through 75 new competitions that will help fund innovative projects across the economy. The principal objective of funding is to stimulate research and development (R&D) and innovation activity, encourage businesses to develop new products, processes, and services with future commercial potential. We help companies take ideas through to commercialisation and independent research shows that every £1 invested by us returns £7 to the UK economy.

Tech start-up initiatives

Small and medium enterprises are a key focus for us and a number of support mechanisms exist that encourage these companies to compete for funding. The budget for the Small Business Research Initiative (SBRI), for example, was increased to £100m in 2013-14 and will increase to £200m in the current financial year. This gives small businesses access to public sector procurement contracts.

The Innovation Vouchers scheme, which gives businesses the chance to access specialist expertise, has expanded, and the Smart Awards budget, at £40m, continues to provide small and medium-sized companies with grants to allow them access to new markets and invest in R&D.

Launchpads

Launchpads are another initiative that have received much attention since the first Tech City Launchpad competition in 2011.

Supporting the development and strengthening of clusters of high-tech start-ups, Launchpads are competitions providing funding for innovative projects in specified themed areas, from cybersecurity in the Severn Valley and space around Harwell to manufacturing in the North West and high performance engineering in Motorsport Valley. Small and medium-sized businesses located within the ‘cluster’ regions have the opportunity to submit R&D projects they feel fit the prerequisites of the competition brief.

How to secure funding from the Technology Strategy Board

With a competitive element to these initiatives, it can be hard for companies to understand what is needed to secure funding from a government agency such as the Technology Strategy Board, particularly as for some of these competitions there may be some prerequisites.

Launchpads, for example, are limited to small and medium business and help technology-themed clusters of young, early-stage companies to develop and grow in specific locations around the UK. We have run seven Launchpad competitions so far, with five more to follow in 2014-15. Being location and sector specific, Launchpads require companies to be based (or planning to be based) within the regional cluster. They also need to:

1. Show innovation

Competitions such as Launchpad are judged by independent experts in each industry so that the winners selected are truly pushing the boundary of innovation. But what exactly does innovation mean to the government? What qualifies as innovation and how can it be demonstrated to a panel of judges?

By definition, innovation means using new ideas to meet the needs of customers. It means applying expertise to meet an opportunity that will have an economic and social impact. This is what competitions like Launchpads are designed to find and, with our help, commercialise. They act as catalysts for companies with exciting projects to conduct research & development activity, share knowledge, develop their entrepreneurial skills and attract further investment to bring their ideas to market.

2. Demonstrate value

We always advise companies to present the opportunity for the project, the business case and the commercial value. Plenty of applications stumble at this hurdle because they cannot clearly and concisely demonstrate the value that they will create and capture. Those that apply for government funding should take this into consideration because, while we want to see creativity, we also want to ensure that any funding provided can, in some way, be returned to the tax payer.

Clothing app Snap Fashion has proved to be one of the most promising and successful funding stories that took an innovative idea and, with the aid and support from the Technology Strategy Board, was able to turn it into a widely popular and commercial product. In just two years, Snap Fashion’s CEO Jenny Griffiths has moved from writing algorithms in her university bedroom to signing licensing agreements in Asia and America.

Customers take a photo of an item of clothing they have seen and drop it into a box on the website or take a photo on the app. The search engine, devised with computer vision technology, uses colour, form and pattern to seek out a High Street equivalent. Snap Fashion’s partners exceed 100 and range from Selfridges, Liberty and Harrods to Gap and Top Shop. Last year Snap Fashion’s turnover was £200,000.

3. Demonstrate a need for government support

Snap Fashion proved that innovation and impact was at the heart of its projects. However, it was not this alone that helped it secure funding. When looking at any application for funding, the Technogy Strategy Board wants to see why public sector support is needed. Can it help a company achieve something that would otherwise not happen? Is there significant risk involved in the project?

Applying for funding from the Technology Strategy Board

Our advice to any fast growing start-up looking to accelerate growth, would be:

  • Keep it relevant: The application process is very competitive and while there may be a lot to say, in the first instance, stick to the guidelines and keep it concise. We want Launchpads to be easy to apply for, starting with a two-minute video. Take the time to prepare, so that your compelling idea stands out and is invited to the second round for depth and detail.
  • Decide how much funding will achieve maximum impact: It can be easy to assume that the maximum funding available is what will make a difference to your project. This is not always the case. We want to see that you have thought through how the money applied for will be used to maximise impact.
  • Finally, take the risk: The Technology Strategy Board is the UK’s ambassador for innovation and new thinking. It wants to see companies pushing boundaries and changing lives. If a risk is involved that inhibits this project from taking shape, we can be the facilitator to alleviate this. Sometimes, the riskier the project the better. If nothing else, it demonstrates commitment to the idea and nerves of steel, which are two things that we need from the UK’s technology industry today.

Nigel Walker is head of access to finance for the government’s Technology Strategy Board. To find out more about the Board’s Launchpad competitions and other funding initiatives it’s currently running, click here

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