The United Kingdom is at a critical juncture, balancing innovation with fiscal responsibility. On one side, we have a dynamic ecosystem of early-stage tech companies, full of potential but struggling to secure the capital and contracts needed to grow. On the other, the government faces increasing pressure to maintain and improve public services, all while managing a growing budget deficit.
This paper, written by Cleantech for UK and Ridgeback Partners, proposes a strategic partnership between the UK Government and early-stage British tech firms, with the government (i) investing as a shareholder and (ii) awarding paid contracts to improve public sector efficiency. This approach drives technological growth, boosts public services, and reduces fiscal pressures, while government shareholding offers potential future returns to fund further public needs or program expansion.
This partnership represents a novel approach to fostering innovation while addressing public sector challenges. It creates a symbiotic relationship, benefiting both the government and tech companies, with wider societal gains.
The process begins with the government identifying promising early-stage British tech companies whose innovations could help address public sector needs or contribute to the UK's clean economic objectives. These companies are often at a critical stage in their development, with significant potential but lacking the capital and market access to fully scale.
Once a suitable company is identified, the government takes a two-fold approach. First, it provides financial investment, injecting crucial capital to accelerate the company’s growth. This enables the company to refine its technology, expand operations, and attract additional investment - often at a higher valuation —creating immediate value for the state as a shareholder.
Second, the government awards the company a paid contract to deliver innovative, cost-saving services to a specific public sector body. This ensures the company has a stable revenue stream and a platform to showcase its solutions, attracting future investors and customers.
In exchange for this support, the government receives an equity stake in the company, ensuring a long-term alignment of interests. As the company grows, the value of this stake increases, potentially yielding significant returns that can be reinvested or used for public spending.
The partnership would subsequently include ongoing government support through mentorship, networking, and access to public sector decision-makers, with regular performance reviews to ensure accountability and assess the programme's impact, enabling successful companies to expand contracts and scale their solutions across other public sector areas.
The government retains flexibility in its role as a shareholder. Depending on the company’s success and policy objectives, the government could choose to hold its stake or sell it at an opportune moment. Any profits from these sales could fund further investments in the programme, creating a self-sustaining cycle of innovation and public benefit. This will position the UK as a market leader in developing frameworks that address critical public sector needs, whilst continuing to forge ahead with decarbonising the economy.
To understand the transformative potential of such partnerships, we can look to the example of Moderna and the U.S. government during the COVID-19 pandemic. While not identical to our model, this collaboration shows the power of government support for innovative companies.
In 2020, the U.S. government, through the Biomedical Advanced Research and Development Authority (BARDA), provided substantial non-dilutive funding to Moderna to accelerate the development of its mRNA COVID-19 vaccine. This partnership allowed Moderna to scale rapidly and develop one of the most effective vaccines against the virus. The government's support was key in enabling this breakthrough.
While our proposed model includes equity stakes, which the Moderna example lacks, the key takeaway remains the same: government partnerships can drive innovation, meet critical needs, and create significant public value. Our model goes further by offering the potential for financial returns, creating a long-term, sustainable funding mechanism for public services.
The diversity of emerging technologies lends itself to solving various challenges faced by the public sector. Below, we present four examples demonstrating how these innovations can improve energy efficiency, advance decarbonisation, enhance access to public services, streamline navigation in complex facilities, reduce missed appointments, combat fraud, and increase engagement between the state and its citizens.
Racanaa, a UK-based energy data company, offers real-time analytics for businesses by monitoring energy consumption at the individual device level. Its system can automatically manage energy supply, switching between grid, stored, and renewable sources as needed. This enables businesses to optimise energy use without changing operations, typically saving 25% on energy bills and reducing their carbon footprint.
Racanaa’s technology could be applied across public sector buildings—hospitals, police stations, schools, etc.—to monitor energy use and automate savings. Additionally, the data can inform maintenance schedules by identifying energy-efficient equipment, potentially allowing the government to make bulk purchases at discounted rates. With the ability to track energy patterns, Racanaa’s system could also help prevent electrical faults, which are a leading cause of fires in the UK.
Biozeroc, a Cambridge-based start-up, is revolutionizing the construction industry by replacing cement with bacteria. Through a unique biological process, they harness microorganisms to bind calcite, a naturally occurring form of calcium carbonate, producing cement-free concrete that can drastically reduce the embodied carbon in buildings.
In early 2023, they successfully created their first full-size brick, marking a significant step towards delivering larger structures for the construction sector. As a UK-based company, Biozeroc is confident they can help the UK Government meet its target of building 1.5 million homes by 2029 in a fully sustainable and circular way.
Modal, a leading UK conversational AI platform, allows hotel guests to interact with smart devices using voice commands for tasks like booking services or accessing local attractions. This technology, however, has far-reaching applications for public services.
In the NHS or assisted living facilities, for instance, voice-activated devices could be used to call emergency services or provide instant non-emergency medical advice. The same system could support translation services for asylum seekers or enable hands-free assistance during medical emergencies by displaying guidance on CPR or other first-aid procedures. This would reduce pressure on hospitals and GP surgeries, improving response times and care quality.
Nuggets is an identity and payments platform that puts users in control of their personal data, storing it in a secure decentralised wallet. This eliminates the need for companies to manage sensitive information, reducing their risk of data breaches and regulatory penalties.
For public services, Nuggets could revolutionise the management of medical records, social benefits, and voting. Patients could securely transfer medical histories between healthcare providers, reducing waiting times. Social benefit payments could be streamlined to verified recipients, eliminating fraud. Digital identities could also enable more secure, fraud-proof voting systems, encouraging greater civic participation.
The program offers vital financial support through direct investment, providing crucial capital to tech startups. This relieves the financial pressures that often stifle innovation and growth. In addition, securing government contracts ensures a stable revenue stream, helping startups overcome one of their biggest challenges—consistent cash flow.
A partnership with the UK Government would also significantly boost the credibility of these companies. Such an endorsement elevates their market position, opening up new opportunities both in the UK and internationally. With government backing and a proven track record of revenue generation, these companies become more attractive to private investors, unlocking further investment and scaling potential.
For the government, the adoption of innovative technologies developed by early-stage companies can lead to substantial cost savings across various public services. This not only enhances operational efficiency but also brings the government closer to emerging solutions that tackle critical national challenges.
Moreover, the government's involvement offers the potential for a return on investment through equity stakes, creating a new revenue stream for the Treasury as these businesses grow. Success stories from this program would enhance the UK’s reputation on the global stage, attracting foreign investment and export opportunities, while the government itself gains recognition for pioneering innovative public-private partnerships.
The program promises to create jobs and drive economic growth as participating companies scale up, benefiting local communities and contributing to the national economy. By supporting these early-stage businesses, the UK strengthens its position as a global leader in technology and innovation, attracting top talent and investment from across the globe.
Many of these emerging technologies align with the UK’s environmental, social, and governance (ESG) objectives, addressing critical societal challenges while advancing the country’s broader policy goals.
A rigorous and transparent selection process will ensure that only the most promising and relevant technologies are chosen to participate. Regular monitoring and evaluation will be crucial for measuring both financial performance and the broader societal impact, allowing the program to continuously improve and scale as needed.
Furthermore, the program offers an opportunity to advance social responsibility. Companies that demonstrate positive practices in diversity, social engagement, and equal pay can be prioritised, ensuring the initiative aligns with wider social justice goals.
This proposed partnership between the UK Government and early-stage tech companies offers a transformative approach to addressing national challenges. By investing in these companies, the government not only supports innovation but also enhances public services, drives sustainability, and potentially generates returns for the public purse.
Policymakers should act swiftly to seize this opportunity, as the program promises to strengthen the UK’s innovation landscape, boost economic growth, and solidify the country’s global competitiveness. The time for bold, forward-thinking action is now, and this initiative could pave the way for a brighter, more prosperous future for all.
Ridgeback Partners can be found here: http://www.ridgeback.partners/
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