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The UK tech ecosystem has expanded massively in the past five years.  However, key gaps remain.  This summer holiday season provides a good opportunity for some reflective thinking about what is working and what is not.  

This blog focuses on one such area – support for healthtech (including digital health and medical device) and other life science companies.

Startups in the healthtech and life sciences vertical face special challenges in the UK. UK universities and startups are developing world-class, groundbreaking technologies in the healthtech and life science areas, including in such areas as digital health, medical devices and diagnostics as well as therapeutics and biotech. However, they have been proportionately less successful in developing these technologies into globally-leading companies, especially outside of pharma. Why is that?  

While there may be a number of reasons, a key issue is access to early stage funding.

A.   Early Stage Funding Gap

UK funding sources for emerging healthtech and life science companies (outside of the pharma and biotech space) are limited. This is true both as compared with funding for startups in other business verticals in the UK and Europe, and also as compared with funding opportunities for healthtech and life science companies in other markets, particularly the United States.  

In the UK, Innovate UK, various elements of the National Health Service (NHS), MedCity and others have implemented various initiatives to address this. These are making a significant difference.  Additionally, the government has just announced a Digital Health Technology Catalyst to match fund the development of digital technologies for use by patients and the NHS. However, much more is needed.

Consequently, among the UK-based healthtech and life science companies that I mentor, I too frequently find that they need to expand into the US (or, less usually, Asia or continental Europe), and relocate a founder at a very early stage, in order to obtain investment and secure proof of concept (POC) and commercial opportunities.

Why is funding in this area so problematic?

1.    Issues with Early Stage Grant Funding. 

Healthtech and life science companies may need significant research and development investment at a stage when most UK private investors (angels and funds) are likely to see the companies as too early for private investment. Consequently, this R&D investment is likely to require a combination of boot-strapping/friends and family and grant funding.  

Innovate UK is a major grant funding source in this area, but frequently conditions its grants on match funding and other conditions.  The Digital Health Technology Catalyst announced last week, which is to be funded with £35 million, will apparently also condition its grants on match-funding.

Other grant funding is available, but these grants may be difficult to identify and their availability is often fragmented (geographically, by particular focus or sub-vertical, by funding institution, and/or subject to requirements that the technology have come from a particular university or involve particular co-partners). 

2. Need for Greater Involvement of Technically-Skilled Angels and Thought Leaders. 

Investment in this space requires a lead angel who is familiar with the technology and the sector. Most angels are reluctant to invest in the absence of such a lead. Angels in MedCity is making a concerted effort to train and encourage medical professionals to become lead angels, but there is still a significant shortage of technically skilled angel investors.

Involvement of thought leaders in a relevant life science speciality in supporting an emerging healthtech company (for example, as advisory board members) is also a critical element in persuading angel and other investors that the technology is sound, there is a real market need, and the company can succeed in reaching customers.  The UK has globally-reputed specialists in many healthtech and life science areas -- however (with limited exceptions), existing arrangements may not incentivize these specialists to work with emerging companies, particularly if the companies have not been spun out of their institutions.

3.    Impact of NHS as the Primary UK Customer. 

The significance of the NHS as a customer in this space, and investor perceptions (frequently shared by entrepreneurs) as to the difficulty of penetrating the NHS, either for initial POC studies or follow-on contracts, provides a further limitation on investor interest in this sector. Additionally, the fact that NHS POC’s are typically not paid (as compared with the opportunity for low funded POC’s in many commercial contexts in other verticals) imposes additional capital requirements on the early stage companies.  

A number of investors have expressly said to me that they would not invest in a company in this sector that is focused on selling to the NHS. As a result, companies seeking private investment frequently must be able to show private sector opportunities, either in the private medical sector in the UK or abroad.

4. NHS and Health Science Complexity and Fragmentation. 

The complexity and fragmentation of the NHS is itself a challenge. NHS initiatives are frequently pursued by a trust or group of trusts, and a successful POC with a particular trust gives no assurance either of a follow-on contract with that trust or success with other trusts. Additionally, the different economic “pockets” within the NHS and between the NHS and social care can make it difficult for companies to identify whether there is a customer that would actually enjoy the economic benefits of money-saving innovation. This last issue is not limited the NHS, of course – it is a general problem in the healthcare sector.

Understanding, and accessing, the various organisations that support healthcare innovation is similarly complex. There are a variety of NHS innovation units, academic health science networks and centres, and other innovation-focused bodies, and it is difficult for start-ups to understand these structures or know where to go to get help.

MedCity has played a significant role in helping companies navigate the complexities of the NHS and health science community in London and southeast England, both directly and through various collaborative efforts in which it has participated. 

One such collaboration, DigitalHealth.London already is making a difference. However, DigitalHealth.London, by virtue of its mandate and funding, necessarily focuses on digital health, London, and on the London-based NHS trusts and their objectives. 

Emerging healthtech and life science companies can only become successful suppliers to the NHS if the companies are supported to achieve success in a broader context (e.g., with the NHS nationally, the private sector in the UK and on an international scale).

5.   Need for Additional High Quality Vertically-Specialised Accelerators. Accelerators have played a major role in the development in London of other start-up verticals, such as fintech. The leading accelerators provide significant mentoring and also provide a curated selection process that results in the display of an attractive group of companies to investors.  

Certain accelerator groups, such as Techstars and Startupbootcamp, have developed strong reputations for both the quality of their companies and the quality of the investors. By recruiting companies on a global basis and being highly selective, they have built the reputation of London as a place for companies to go to develop their businesses and look for investments.  Many of these companies then stay in the UK and, in, any case, this activity helps to build a broader ecosystem for the companies that originate in the UK.

The UK accelerators focusing on healthtech and life sciences have faced special challenges relating to the underlying fragmentation of the ecosystem and the funding conditions and constraints under which they operate.

The DigitalHealth.London accelerator, while an outstanding initiative, is bound by DigitalHealth.London’s central mission to focus on digital health, the NHS and London.

MassChallenge UK, a charity to that operates a broad-based accelerator, has included a significant number of healthtech and life science companies (circa 15 per cohort), and its US affiliate MassChallenge has a digital health-focused accelerator in Boston (Pulse).  However, MassChallenge UK, which is not sector-specific, was not able to run a UK programme in 2017.

PwC launched The Future of Health accelerator in Salford in collaboration with UP Ventures. As a specialised healthtech accelerator focusing on helping startups address commercial as well as NHS opportunities, this fills a significant gap. Due to its funding conditions, however, the initial programme primarily appealed to companies willing to focus on greater Manchester and the North West.

Last but not least, the Mayor’s International Business Programme provides focused support for healthtech and life science companies, but it is focused on London-based companies that are ready to scale and expand internationally.  Tech City UK’s Future 50 and Scale-up programmes are not-sector specific but provide support for companies that satisfy their criteria.

6.    Challenges in Engaging with Corporate Venture Funds and Innovation Units. 

There are a large number of corporate venture funds and innovation units in the healthtech and life sciences space. 

However, these units vary in terms of their areas of interest, how they choose to relate to emerging companies, stage at which they are prepared to invest or collaborate, etc. Many of these units are not UK-based but would be prepared to work with UK early stage companies (in contrast, most angel and early stage VC investment is local). Early stage companies find it difficult to identify these opportunities and to secure appropriate introductions.

7. Dearth of Investors. 

In part as a result of the foregoing factors, one finds a limited number of early stage venture capital funds, angels, and angel-led crowd-funding platforms in the UK that are prepared to invest in healthtech and life science companies. Few UK investors are focused on this sector at early stage, and many early stage investors that are otherwise prepared to consider a broad range of sectors frequently exclude the healthtech and life science sectors.

Additionally, the few governmental matching funds that will invest in this space are frequently subject to geographical limitations (e.g., London, Scotland or Wales only, or relevant other region).

Several Chinese-controlled VC funds that look to make medtech and life science investments have recently entered the UK market. It is not yet clear what impact they will have.

There are a number of continental European VC’s in this space (particularly in France, Germany, Switzerland and the Nordics). It is difficult for startups to assess the extent to which they are prepared to invest in UK companies and, if so, at what stage of development. The same is true in reverse in respect of UK VC’s in respect of continental startups that lack a UK presence.

B.       Potential Approaches

Needless to say, it is rather easier to identify problems than to propose and implement effective solutions.  Here are some thoughts as to what could be done in the near-term.

1.  Help Companies Identify, and be Introduced to, Existing Resources.

Particularly given the complexity and fragmentation issues described above, a key way that we can help early stage UK medtech and life science companies is to assist them to identify those resources that are available. This is not simply a matter of mapping those resources for them (although that is a key first step). It is also important to put relevant organizations and individuals in a position to provide founders, where appropriate, with warm introductions to those who may be interested in what they are doing.

As noted above, the mapping exercise should take a broad geographic view – some resources available to UK companies may not be based in the UK. For example, inclusion of corporate venture and innovation units, wherever located, is a key component of this effort since those units may not be geographically bound. Similarly, an effort could be made to reach out non-UK based angel groups and venture capital firms that have shown a willingness to invest in UK based companies that have not (or, at least, have not yet) expanded into their local markets.

Tech London Advocates, a volunteer organization supporting the development of the tech sector in the UK, is looking to collaborate with others to address this need, and I am active in that effort.

2. Break Down Geographic Barriers to Funding and Acceleration

We need to break down geographical barriers that limit the availability of funding or accelerator opportunities within the UK. The impact of limited resources is magnified by this fragmentation. Some of these barriers result from the geographical requirements of European Union development grants that fund the programmes, but others result from, e.g., the NHS approach to funding innovation.

HouseMark Evolve is a new accelerator in the social housing sector that provides an interesting example of how broader national collaboration might be pursued – it resulted from the collaboration of a number of different public and private social housing organisations, and was managed by LMark.

3. Engage with the Private Sector

The UK private sector has a key role to play in helping the emerging healthtech and life science sector. Incumbent pharma and medical technology companies, private health insurers, clinics, charities and foundations, the various disease-focused research charities and others can provide funding, mentorship and collaboration opportunities and a variety of other assistance. For example, they can support emerging companies through corporate venture unit and other investments, challenges, access to their innovation labs, encouragement of employee mentorship, and the provision of platforms for public exposure and validation. 

Consequently, a key priority is to identify the organisations that would be best placed and motivated to coordinate and facilitate that involvement.

One specific approach could be the establishment of an accelerator supported by a group of such companies and medical charities, following the model of the Fintech Innovation Lab (which is run by Accenture for a number of leading banks). Such an accelerator could become a key source of funding (through introductions to appropriate venture capital firms and others), mentorship and POC opportunities and customers for UK emerging companies. As it happens, Accenture runs such a healthtech and life sciences programme in the US (Accenture Healthtech Innovation Challenge  Another such example is StartUp Health in the US, which is both an accelerator and an investor.  Techstars runs a healthcare focused accelerator in Los Angeles in collaboration with Cedars-Sinai Perhaps PwC’s Future of Health initiative or a similar effort could become a starting point for such an initiative in the UK.

Finally, NHS-focused organisations need to recognise that healthtech and life science companies cannot succeed and develop solely by servicing the NHS – consequently, from an NHS perspective, private involvement is critical, for investment, mentorship, collaboration, proof of concept opportunities and commercial contracts. The DigitalHealth.London accelerator appears already to have taken this point on board, but I would suggest that there are broader opportunities for private sector involvement.

4. Encourage Development of UK Investment Community

A longer term objective should be to grow the early stage healthtech and life science investment community in the UK.  Initiatives like Angels in MedCity already play an important role in this effort. Similarly, the various regional funds, like the London Co-Investment Fund and similar funds in Scotland, Wales and elsewhere, are prepared to co-invest in this sector, and it sounds like the Digital Health Technology Catalyst will do the same in respect of digital technologies.

However, the establishment of additional sector-specific investment or co-investment funds would be very helpful. An example of this approach is Epidarex Capital, whose early stage life science and healthtech fund received investment from Scottish Enterprise, the European Investment Fund, Eli Lilly, the Strathclyde Pension fund and several research-focused universities.

Medical technology and life science foundations and disease-focused research charities that invest in this sector should be encouraged to dedicate a part of their funds to early stage initiatives. At early stage, relatively small amounts of money can have a disproportionate effect in permitting companies to develop interesting technology, since founders are frequently taking little or nothing out of the business.

Additionally, international promotion of emerging companies in this sector may encourage non-UK investors focused on this sector to look at investment opportunities in this market. Trade missions with political support, such as those organized by the Department for International Trade and London & Partners, can have a disproportionate effect in publicizing the quality of potential investee companies in the UK.

5.    Encourage Further Engagement of UK Medical Technology and Life Science Thought Leaders with Emerging Companies

As the US example has shown, involvement of thought leaders plays a disproportionate role in the success of emerging healthtech and life science companies. Investors are more likely to invest, and companies are more likely to secure POC opportunities, if thought leaders with relevant expertise are involved with companies as board members, advisory board members, angel investors or otherwise.  These thought leaders are very busy people, and it is asking a lot to expect them to take on this additional burden. That being said, healthtech and life science thought leaders in some other markets, such as in the US, appear to be more involved with emerging companies than is the case in the UK.  

Establishing appropriate incentives for this kind of activity can give rise to concerns about conflicts of interest and other concerns. However, there are ways that one could address these concerns (with carried interests in funds, for example) while providing appropriate incentives for the relevant professionals to devote time to this kind of activity.

Initiatives like the Health Foundry, sponsored by the Guy's and St. Thomas' Charity, also have a role to play, by encouraging medical professionals to engage actively with startups in developing solutions to the problems that they face.


The UK is developing great tech in the healthtech and life science space.  With key initiatives to help companies identify resources, overcome geographic and other fragmentation, engage with the private sector, further develop the investment community and engage thought leaders, we can help the sector reach its potential.

* * *

This discussion is not intended to provide legal advice, and no legal or business decision should be based on its contents. It reflects the personal views of Bob, and not those of any firm or other organisation. If you have any questions or comments, feel free to contact [email protected] or via LinkedIn here.

You will find Bob’s other weekly blogs for emerging and growth companies on US issues, international expansion and early stage financing here:

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