CBBC Insights: Education | Funding the UK’s Eight Great Technologies with Chinese investment

By Simon Stewart
Director, Education, Training & Talent (China)
China-Britain Business Council

The Eight Great Technologies (8GT) is a British government initiative designed to position the UK as a leading innovator in eight fields where we have particular strengths: advanced materials, agri-science, big data, energy storage, regenerative medicine, robotics and autonomous systems, satellite technology and synthetic biology. There is little doubt about the UK’s research capability in these areas, but financing and commercialising innovative research remains a challenge and is a critical element of this initiative. Both the government and private investors have a role to play and ultimately both can benefit. But Britain cannot work in isolation.

In January, the China-Britain Business Council (CBBC) held a forum with Chinese investors in Beijing to discuss opportunities for Chinese investment in British research programmes, which included a keynote speech by Lord Willetts, who first proposed the 8GT concept as science and universities minister in 2013. He is now chairman of the private 8GT Fund, which invests in early-stage 8GT technologies to help commercialise them. Over 20 Chinese investors were at the forum to learn more about the initiative and opportunities for collaboration.

UK strengths in 8GT

Of course the UK is not the only country focusing on innovative solutions in these key technologies, but Lord Willetts highlighted the uniqueness of the UK’s capabilities to the Chinese audience. He cited niche areas of expertise in smart robotics software, including research clusters in Edinburgh and Bristol. He discussed the UK’s catapult centres, which are enabling advances in a wide range of sectors, combining business and academic research and making British technology a commercial reality. He also highlighted existing cooperation with Chinese companies, such as the University of Surrey’s partnership with Huawei Technologies to develop 4G, the internet of things and education technology.

The 8GT Fund focuses on the core areas where UK innovation can make a difference and where Chinese firms can make long-term investments in early-stage technologies. Kirk Wilson, executive director of CBBC, explained how technological innovation is a crucial element of China’s economic transition, which will accelerate its move up the manufacturing value chain and help it to tackle environmental and demographic challenges. However, if this potential is to be realised, more discussion is needed about financing, decision-making powers and investment and commercial strategies.

What role for private investment?

The UK has a fine pedigree in scientific research. Our scientists are supported by research councils and government funding that enables them to create new solutions to the greatest scientific and industrial problems. This brings an enormous benefit not just to university research institutes but to businesses too, and private investors have a role to play in bringing new ideas to life.

Private investors often prefer to engage at later stages of the investment cycle, when the commercial viability of an innovation is clearer and the risk is lower. It is the trickier early stage when funding can be difficult to attain – and this may mean losing viable technologies before they have been fully tested and developed. The 8GT Fund aims to back early-stage technologies so that they can be commercialised and bring value to investors.

The forum also touched on the strategy adopted by many private investors of arriving late in the investment cycle and exiting relatively early, lower down in the investment J curve (above) – a short-term approach which, though lower-risk and profitable, means surrendering long-term financial dividends. Now, leading technology investors such as Microsoft and Apple are increasingly playing the long game instead, an approach which is favoured by the 8GT Fund to allow for greater innovation and commercial development. Attendees such as Chen Xiaofeng, deputy general manager of CAS Holdings, a commercial arm of the Chinese Academy of Sciences, concurred with the 8GT team that a longer-term approach is prudent.

What role does China have to play?

Speakers at the forum recognised the increasing role that China has to play in future R&D, and not just in financing it. The recent visit by President Xi Jinping heralded a considerable amount of inward investment, but China still has a bigger role to play in the commercialisation of technology. Its developed manufacturing clusters make it one of the most efficient places to make innovative ideas into real commercial products, and Asia’s continued economic growth, spending power and demand for new ideas makes the region a primary market for many of them.

Chinese investors at the forum were keen to understand more about business issues such as due diligence and risk assessment, as well as the control and decision-making power that private Chinese investors in 8GT would have. CBBC’s Kirk Wilson emphasised the value of including Chinese investors in the decision-making process, as they can advise British investors on how to leverage the full power of commercialising, manufacturing and monetising innovation through the Chinese market.

Conclusions

The Eight Great Technologies Forum enabled senior Chinese investors to understand the unique strengths of UK innovation, as well as giving practical advice on how they can invest in and help commercialise UK technology. The discussions were not just of a financial nature; there was also consensus on the important advisory role that Chinese investors have to play in commercialising products in China, at both the manufacturing and the market development stage. CBBC acts as a platform for UK-China cooperation, providing channels for joint innovation and entrepreneurial partnerships, as well as Chinese firms investing in the UK. Further collaboration is essential if the current “golden era” of bilateral relations is to produce innovative outcomes – but for now there is clearly an appetite on both sides to do more business by building the innovative technologies of the future.

To learn more about this subject or how your business can engage with China, please contact the author: simon.stewart@cbbc.org.cn

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