From lab to market – part 1: finding investment

When you have to approach businesses for funding to move forward with scientific research, it can feel overwhelming.

But business is nothing more than terminology and common sense, and as a scientist myself, I learned to approach it methodically and analytically. The majority of researchers who wish to commercialise their work do not fail because of inadequate science but because they aren’t taking the necessary measures before looking for investment.

The reality check

Before you start exploring venture capital, angel investors and grants to fund your endeavours, stop and ask yourself: “How abstract and innovative is this project?”, “Is this research actually viable and ready, and if it is, in which stage is it?”, “Does something similar already exist?” and finally: “Who would want to fund this research and what options do I have?”

All research should be assessed based on its viability metrics. These are simple: Problem, Readiness, Timeline, Economics and Team. There is a significant difference between a promising laboratory result and a product that someone will pay for, and an idea that will remain only an idea if it can’t be scaled up. So, if an abstract idea cannot be scaled, you need to investigate further before attempting to create a spin-off. That brings us to readiness.

• Plan your route from research to market
• Bridging the academic-commercial divide: a practical guide for university researchers
• The path from ‘eureka’ to patent

The Technology Readiness Level (TRL) framework implemented by Nasa, which goes from TRL 1 (a basic concept) to TRL 9 (a fully deployed product), is widely used by funders in the UK and Europe. Most research-based businesses begin between TRL 2 (proof of concept) and TRL 4 (laboratory validation). You can better grasp what evidence you need to collect and what kind of funding is now feasible if you know where you are.

While examining the question “Does something similar already exist?”, don’t be frightened if it does – and don’t give up. There can be multiple novel solutions addressing the same problem but your target audience would be smaller if divided. If similar solutions exist, you’ll just have to demonstrate why your solution is faster, cheaper or better. You need to be able to explain the difference to a potential customer in one sentence.

A thorough competitor analysis can give you valuable information. Search patents, academic literature, commercial databases and start-up registries. You’ll find the solutions that currently exist, how they operate, the size of the market and the progression thus far, plus you can identify weaknesses, strengths and opportunities. Ask prospective clients what they currently use when you speak with them and how satisfied they are. The market frequently offers “good enough” solutions and your task is to demonstrate why these are insufficient.

Put the IP before the ‘tea’

One of the most typical and costly mistakes made by scientists approaching the commercialisation phase is openly discussing their work before securing it. I know first-hand how validated a scientist feels when talking about their research to other people. A public disclosure, whether in the form of a publication, a newsletter or a conference presentation, has the potential to invalidate a patent application in many jurisdictions.

Collaborate with the technology transfer office at your university to learn about intellectual property, who owns it and what protections are available. In the Innovation Support Unit at my institution, we offer prior disclosures, licensing and spin-off support and we help with the application process to secure an IP if the idea is patentable, while addressing existing options. 

Try to find out early if the IP sits with the university/research institution or if you have an ownership percentage, and explore options such as negotiating a deal for spin-out or licensing. An investor has almost nothing to gain if there is no IP control or a clear licensing agreement. 

The first step

Before any serious investor will consider your venture, you need proof of concept: concrete evidence that your science does what you say it does and that there is a problem worth solving.

The best way to obtain that proof – without giving up ownership of a business you haven’t yet successfully established – is through grants. There are multiple government funds and grants to help you sponsor the work required to fill in the necessary gaps. Some of them can be thematic, such as addressing a specific problem, such as climate change or microplastics, but there are also specific grants for assisting progression of a small to medium-sized business. 

The UKRI translation fund offers proof of concept awards of £100,000 to £250,000 and supports up to 36 projects each year. The European Research Council also awards proof of concept grants on the basis of a lump sum of €150,000 (£130,000)for a period of 18 months.

The Innovate UK ICURe programme enables researchers to translate groundbreaking research into investment-ready spin-out firms and license agreements. This initiative offers personalised support to identify the commercial potency of an idea, while educating scientists to explore the business and marketing aspect of science. 

Other grants and schemes include the King’s Trust Enterprise programme, the New Enterprise Allowance, the National Lottery Fund and the social entrepreneur awards.

The grants above, as well as the Innovate UK Smart Grants initiative, are ideal for researchers with novel technologies who seek to illustrate the route to commercialisation for their innovation. To be successful, you need to demonstrate not only the science but the business opportunity and your plan for commercialisation.

The investment journey

Once you have proof of concept and a valid business plan – outlined in part two – in place, you can start thinking about your pitch to attract investors. Develop an elevator pitch that, in under two minutes, addresses the problem, your solution, the “why?” and a call to action. 

The purpose of a pitch is not to close an investment on the spot. It is to generate enough interest to earn a follow-up conversation.Then, you will have to generate a business pitch – this is usually 10 to 15 slides that indicate your innovative technology. The business pitch presentation contains the problem, the solution, the competition, the market, the opportunity along with the value proposition, the business plan, the financial projections, your team and the financial ask. Investors also appreciate an exit strategy, if you are able to provide one. 

Practise your pitch with people who will challenge you: other founders, mentors from programmes such as Innovate UK Edge, or experienced advisers from your network. The questions investors ask are predictable, so prepare for them thoroughly.

It helps to understand how funding typically progresses for a spin-out company. The stages are not rigid and they can change depending on the needs of the business and your timeline, but they follow a logic:

Pre-seed: The early stage. Grants and proof-of-concept funding to demonstrate technical feasibility. Small amounts of funding, often from angels or university seed funds, to help you move from concept to prototype. Investors at this stage are backing the people and the idea more than proven traction.

Seed round: The development. Small equity investment (typically £250,000 to £1.5 million) to validate the market, build a prototype and assemble a founding team. You’ll need to show that customers exist and that the core technology works.

Series A: The scaling. Larger investment (typically £2 million to £10 million+) to scale operations, grow the team and move toward revenue. Investors at this stage expect early revenue or strong signals of it, a clear commercial model and a team capable of executing at pace.

There are Series B and C but for future scaling of operations, when you have something substantial already.

Not all venture capitalists are relevant to you. Most early-stage researchers should be targeting:

• University seed funds: almost every Russell Group university has one, as well as some universities with high IP output (Imperial Innovations, Oxford Sciences Enterprises, Cambridge Enterprise). Innovation hubs (Francis Crick, White City, UKRI innovation, BIS) and start-up hubs can also support by identifying grants and helping with networking through events. They’re the most natural first institutional investors because they understand long development timelines and already have a relationship with your technology transfer office.
• Deep tech/life sciences venture capitalists: funders such as Ip Group, Syncona, Amadeus Capital and Octopus Ventures have specific mandates for science-based ventures. Approaching a consumer tech venture capitalist with a biotech project that’s only at Technology Readiness Level 4 (laboratory validation) is a waste of everyone’s time.
• Angel networks: angels often move faster than venture capitalists and are more willing to back at pre-seed. The UKBAA and networks like Cambridge Angels, London Business Angels and sector-specific groups (for example, HealthInvestor) are worth knowing.

Something important to note is that cold emails to venture capitalists almost never work. The model is warm introductions. 

Also, the investment process takes a long time. It often takes six to 12 months from the initial meeting for the money to hit the bank. Many researchers greatly undervalue this. The practical implication is that you should begin cultivating relationships with investors before you require funding. Participate in the discussions, attend the events and get input on your proposal without requesting funding. You want investors who are familiar with you by the time you’re ready to raise money.

It is a whole journey to develop a company but, if you’re well-prepared, it can be an enjoyable one. Something important to remember is that you are not alone is this. Surround yourself with the right team – investors invest in people as much as ideas. Demonstrate that you understand your limitations, have the right advisers around you and are willing to learn. Intellectual humility, combined with genuine conviction in your science, is a powerful combination.

Eirini Epitropaki is innovation business development manager at Birkbeck, University of London.

If you would like advice and insight from academics and university staff delivered direct to your inbox each week, sign up for the Campus newsletter.