Midlands universities create £250mn tech investment vehicle

Eight universities in the Midlands have launched a £250mn investment vehicle to fund companies “spun out” from research, as the UK seeks to harness advances in science and technology to boost regional growth.

Midlands Innovation, a group of institutions including Loughborough university, the University of Birmingham and the University of Warwick, on Monday launched Midlands Mindforge, with the aim of providing investment and support to early-stage technology businesses in the region.

The launch reflects a shift among universities towards commercialisation of research and regional economy strategy, as the government turns to the sector as a growth engine driving levelling-up and boosting productivity.

In last month’s Budget, chancellor Jeremy Hunt announced that he would create 12 low-tax “investment zones” focused around universities, which would each receive £80mn in the form of tax incentives and investment over five years.

Mindforge takes a cue from similar university investment vehicles, such as Northern Gritstone, which was created by the Universities of Leeds, Manchester and Sheffield. It has so far raised £215mn towards building what it hopes will become a northern innovation hub.

Professor Trevor McMillan, chair of the Midlands Innovation board and vice-chancellor of Keele University, a co-founder, said the vehicle would be a “catalyst for building groundbreaking businesses”, creating highly skilled jobs and boosting growth.

“By cultivating an environment where postgraduate students and researchers with commercial ideas can benefit from early access to investment, we can create opportunities for our people, place and partnership to flourish,” McMillan said.

The vehicle will target companies in areas such as AI and clean technology based on university-level research, providing funding at crucial early stages of their development when they may be overlooked by conventional investors.

It plans to raise £250mn from corporate partners, institutional investors and individuals. The Midlands currently accounts for 15 per cent of high growth SME businesses but attracts 5 per cent of investment value, it said.

George Freeman, minister for science, said there was an “urgent” need to commercialise UK science and technology. “As we in government increase UK public R&D to a record £20bn a year, the key is private finance backing spinouts and scale-ups,” he said.

Henry Whorwood, analyst at consultancy Beauhurst, said the investment vehicles could play an important role in improving access to capital, a problem for nascent companies, especially in Britain’s regions.

However, he added, a “cosy” relationship with funding vehicles could give universities more power over which companies received funding and the conditions academic institutions placed on start-up founders.

The work of investment vehicles such as Mindforge would be separate but complementary to the government’s policy of investment zones, Whorwood added. The former help companies get started by offering them capital, while investment zones give companies incentives to stay in regions after they set up.

“They are two quite different levers that could have the same outcomes.”

West Midlands mayor Andy Street said the investment vehicle would support his mission of driving regional recovery and creating high-quality jobs and sustainable economic growth.