A Conversation with Plexal's MD about the latest deep tech funding trends.
By Chris Dines, CEO of Informed Funding
It’s amazing to think Plexal, the innovation hub based in the Olympic Park at the Here East campus, opened its doors just over two years ago. It’s one of my favourite business places in London and really succeeds in its goal of fostering collaboration between large enterprise, academics and emerging disruptive businesses. Plexal has partnered with organisations as diverse as Barclays, Transport for London, University College London and, I am pleased to say, Informed Funding.
Informed Funding provides funding and financial guidance to directors, finance directors and entrepreneurs. We’re teaming up with Plexal to organise our 2019 edition of the Funding for Deep Tech conference and I was delighted to get the chance to sit down with the hub’s managing director Andrew Roughan.
The conference will focus on which businesses are getting funded and why in the technology segments of artificial intelligence, smart mobility and cyber security. Many of the businesses based at Plexal specialise in these areas so Andrew has some real practical experience.
With the launch of LORCA last year, Plexal has become one of the most exciting places in the UK for cyber security. Sponsored by the UK government, the programme is aimed at scaling companies that will revolutionise cyber security.
Plexal’s mission for LORCA is simple. “We will help them scale, develop their products for the market and access new markets,” Andrew says. LORCA has smashed its investment target of helping members raise £40m in three years: less than two years in and cohort members have raised over £58m, and counting. And that’s largely because industry demand guides strategy. LORCA consults with a cross-section of industry leaders through regular forums to deeply understand their needs and priorities, which informs the solutions the programme supports. “We sit on the apex of industry need for cyber security and the scaling companies’ technology,” Andrew tells me.
In the first cohort, ZoneFox, a cloud-based security platform that fights insider threats within enterprises or service providers, was acquired by US giant Fortinet. In the most recent group of companies, Quant Network, which interconnects blockchains, and connects them to existing networks, won a contract with the largest clearing house in Europe. “It’s the first time this tech has been both trialled and in operation,” says Andrew, adding that large enterprises are increasingly keen to roll disruptive tech into their existing managed services.
These start-ups and scale-ups face some common challenges, in addition to access to talent, Andrew has witnessed. At the seed stage there are lots of grants and angel investors and it’s a vibrant community. “What’s lacking is the scale in venture capital,” he says. When it gets to Series B rounds, the capital can be lacking while decision makers are based overseas. Despite being one of the top markets for cyber security in the world after the US and Israel, the market in the UK is still green. “What’s missing in the UK are the trends,” says Andrew. “There hasn’t been enough capital invested so we don’t know outcomes. It turns off the investor in a self-fulfilling prophecy.”
As part of the Funding for Deep Tech 2019 conference, we’ll be looking at the latest research and analysis from Beauhurst, the leading start-ups database, in a bid to spot and examine those trends. Beauhurst, Plexal and Informed Funding, alongside other experts, will be looking at data on the most high-growth companies in cyber security, artificial intelligence and smart mobility. Most importantly, we’ll be taking a look at how, and by whom, these start-ups and scale-ups are getting funded.
Smart Mobility will also be on the agenda. This segment faces quite a different challenge to cyber security, says Andrew. “Regulation is a challenge as legislation in the UK is quite dated. The highway code goes back to 1835.” Plexal is focused on bringing together the demand of the public sector with the innovation of the private sector, looking in particular at social inclusion with the right commercial outcomes.
Again, Plexal is home to leaders in this field, including the London headquarters of the start-up Bird – the fastest start-up ever to reach a $1bn valuation – which is currently running an electric scooter trial in Queen Elizabeth Olympic Park. London is a huge market place and one of the capitals that’s still left to crack.
When it comes to Smart Mobility, investment trends are more global while the technology is often inbound, Andrew tells me. “There’s a little confusion about where the investment should go,” he says. “Should it go towards charging infrastructure or should it go towards battery technology?” We’ll be examining the data to see how investors and innovators are tackling the dilemma.
Andrew is particularly excited by Plexal member Bidstack, a rapidly scaling company which uses artificial intelligence to control the advertising environment within a computer game, both making it bespoke to the user and allowing it to translate across their different devices.
Granted, artificial intelligence is embedded in most technology and segments these days, including both cyber security and Smart Mobility. “From health to transport, AI opens up exciting new avenues but the big challenge is the question of ethics,” says Andrew, given the borderless nature of AI and the difficulty of it being regulated by national governments. His advice to investors is clear, though. “Focus on the quality of the product. Good quality, ethical products will emerge and they will be very successful.”
The conference promises to bring together actors within the industry, with the latest data from Beauhurst and impartial financial guidance and analysis from Informed Funding. “Access to funding is really important,” says Roughan, particularly as it’s outside Plexal’s remit. “We’re not a funding advisory service and we’re not a venture capitalist fund.”
Innovation hubs like Plexal are showing how to foster an environment in which hugely successful businesses can grow. This is admittedly a volatile time for the UK but I couldn’t agree more with Andrew’s assessment of the situation. “Despite the geopolitical events in the UK, trust the stability in the UK marketplace, trust the talent,” says Andrew. “We have a landscape which is growing and maturing at same time. That is quite unique.”
Join us at the Funding for Deep Tech 2019 conference on November 26th. We’ll be looking at the trends, the data and the businesses with a diverse mix of investors, analysts, innovations, and leaders in these technologies to identify the success stories of the future.
We look forward to welcoming you.