Is London ready to become the next biotech hub?
In this month’s Windback Wednesday series, we’re all about entrepreneurship: what it takes to be one, how to become one and more. But if you’re based in London, it’s not so easy. Although it’s got the brains and research centres to make it a hub, setting up shop in London is the tricky part. In this podcast, I speak to Kit Malthouse, the Deputy Mayor of London for Business and Enterprise, and find out how London is preparing to become the next biotech hub.
Kit Malthouse, the Deputy Mayor of London for Business and Enterprise has big plans for London. In his speech at SynBioBeta event at Imperial College London, he spoke of his dreams of London becoming the next big hub for biotech start-ups. He is aware that the foundations for this already exist.
“To a certain extent we already are. We have a huge life sciences sector.” Five large research institutes, many hospitals, Institute for Cancer Research the Crick Institute (soon!) and many more are part of an ecosystem that already exists in London. But what the Deputy Mayor hopes to do is “give it some coherence, so that it comes together as an entity… promote it, and fundamentally attract investment in.”
This is where the Deputy Mayor is really focussing his energy. The UK has seen a few biotech and life sciences companies flee London for different pastures, and he wants them back. But more importantly, he wants to attract “risk capital”. Without investors willing to take a chance on new ideas, it will be difficult to get them off the ground, and we may never find out what true biotechnology potential lies in London.
“If you’re an academic researcher coming out of an institution, looking for money to commercialise your molecule or technology, you need money. And at the moment that’s quite hard to find.”
The Deputy Mayor wants to create a “fizzing, buzzing ecosystem” that will give scientists the money they need. And he compares his future biotech hub plans to those from the tech and digital boom. London started with a few small businesses looking for investment, now big corporates like Google and Telefonica are coming in and investing money, as well as venture capital. “That will fundamentally be the key that unlocks the issues,” says the Deputy Mayor.
There are other issues, but these are similar to any other industry’s issues: where will all the small business go? “The graphs between what they need and what they can afford doesn’t cross in London. So we’re looking at how we can provide incubator and follow on space.” Living space is also an issue in London. Although a fabulous city, it’s not a cheap one to live in. “If you’re an academic, it’s pretty tough. If we look at the Crick, the Crick is going to have 1500 researchers in it from 2015. They’re not paid millions of pounds, where are they going to live? So we’re talking about whether we can create some sort of housing for scientists and scientific researchers. A science ghetto if you like.”
“But critically, it will be about risk capital. That’s what we’re lacking in London. We’ve got everything else. We’ve got the brains, we’ve got the research centres, we’ve got the know-how, we’ve got connectivity to the rest of the world. We just need the money now.”
So the big question is: with all the potential that the biotech industry brings, why aren’t investors throwing themselves at this opportunity in London? The Deputy Mayor says it’s due to a number of things:
1) “Small capital has a bit of a bad name.” According to the Deputy Mayor, returns aren’t always great, nine out of ten molecules won’t make it, and in the life sciences it’s “almost kind of charitable giving”. So, are the right tax frameworks available? The governments have the patent boxes, Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), Entrepreneurs Relief. But is that enough? “We’re having a look at City Hall to see if the fiscal environment is right,” says the Deputy Mayor.
3) Exposure issue: “Tech and digital doesn’t have a problem attracting venture capital; that’s because it’s kind of sexy and cool. And people understand it.” Tech and digital is easily accessible by everyone. Molecular biosciences, on the other hand, aren’t. “Trying to explain to somebody that a small molecule that will do something to sugar that will produce… it doesn’t really have mass appeal.”
4) Public market: how liquid is it? Although venture capitalists might be interested in your ideas and potential products, ultimately, they want to know about the return on their investment and where their exits will be. Will there be a market for the investment? “Our public market [in the UK] has been a bit sluggish over the last 10 years. It’s now really getting going. Aim is motoring; the stock exchange is doing very well. We lobbied successfully to get stamp relief on high-growth companies on Aim last year, which made a big difference to liquidity…. Aim could in time become our own kind of NASDAQ, where there is hungry capital looking for opportunities.”
If these three things can be aligned: tax, culture and sense that life sciences is something where money can be made and interesting and exciting research can be done, then the ecosystem for commercialisation will come.
If and when this happens, how can scientists who have great ideas prepare for this? The Deputy Mayor has two kinds of advice, the personal and the institutional.
Personal: “Stick with it. It’s bloody hard.” The Deputy Mayor has a right to say this, as he is an unusual type in the world of politics in that he runs his own businesses too. “It’s a really, really tough gig, and you really have to put your head down if you believe in your product.”
Institutional: “The key thing, I think, is engage.” This means, like Steve Blank said in the previous podcast, you need to get out of the lab and talk to people. “Get out there, network, go to events, present yourself, promote yourself, talk to journalists…I think critically that you need to go out and engage, rather than sit looking down your microscope!”