Midlands investment alliance aims to eclipse northern neighbour

The investment company created by Midlands universities to support research spin-outs will eventually attract more funding than a similar venture run by institutions in the north of England, one of its founding vice-chancellors has claimed.

Recent news that Northern Gritstone, a venture capital outfit created by the universities of Leeds, Manchester and Sheffield, has secured £312 million in financial backing just over two years after its launch in July 2021 would seem to set a high bar for its Midlands counterpart, Midlands Mindforge, which was formed last year.

But Aleks Subic, vice-chancellor of Aston University, which has joined forces with the universities of Birmingham, Leicester, Nottingham and Warwick, as well as Cranfield, Keele and Loughborough universities, told Times Higher Education that the funding goal was eminently achievable.

“It will surpass Northern Gritstone,” said Professor Subic. “With eight universities – including big universities – I think we should.”

For Professor Subic, who previously chaired the prime minister’s industry task force in Australia while he was based at Swinburne and RMIT universities, a specialist vehicle that can attract major funding and then invest in innovation-led companies at scale tackles a major structural problem faced by Midlands universities.

“In Australia, we used to say, ‘Start up is easy but scale up is hard.’ There are a lot of grants available but scaling up businesses requires someone to take risks,” explained Professor Subic, adding that this could “require hundreds of millions of pounds, not a few £20,000 grants”.

Given the medium-sized nature of many of Midlands Mindforge’s institutions, investing to the required degree in a variety of start-ups, or providing additional funding, was impossible for individual universities, he continued.

“No one can do this on their own – to support 100 start-ups a year in which maybe five have the ability to truly scale [will not happen]. If we come together, then we give ourselves a chance,” said Professor Subic.

Despite the historic links of many Midlands universities to nearby employers in what is often considered Britain’s manufacturing heartland, substantial investment in potential spin-outs had still proved difficult, he added. “The majority of companies here are small- to medium-sized enterprises, so industry does not want to take the risk either,” Professor Subic said. Just 5 per cent of UK equity finance deals centre on the Midlands despite it having some 11 per cent of fast-growing SMEs, he notes.

Midlands Mindforge, which has emerged from the Midlands Innovation partnership started in 2015, will focus on commercialising research in three key areas: life sciences including health technology, green technology including agriculture, and deep tech such as AI. In total, its university income is £3.7 billion and its institutions have more than 15,000 academics and 54,000 postgraduates.

That research power is, however, been underutilised, with Midlands university spin-outs garnering about a sixth of the investment gained by golden triangle start-ups, said Lisa Smith, Midlands Mindforge’s chief executive.

“Oxford and Cambridge didn’t just suddenly start doing this kind of work – they had purpose-built vehicles to do this,” said Dr Smith, noting that the formation of Oxford Sciences Enterprises in 2015 has been followed by a quadrupling of the number of spin-outs created annually from Oxford research, while investment funding has increased sixfold to about £800 million a year.

“At Midlands Mindforge, we will have true and deep relationships with our partner universities and, as a project evolves, we will be able to help these companies down a commercial pathway and find the right money [to scale companies],” she said.

jack.grove@timeshighereducation.com