Silicon Valley wasn’t built in a day, nor was London’s tech industry, and while its growth can’t be attributed solely to one government, governments can certainly benefit or hinder Silicon Valley.
The tech world moves slower than people like to tell you. Venture capitalists (VCs) often tell their investors (LPs) that it will take 5-7 years to see a return, when deep down we all know it’s closer to 15 years. But the best VCs and LPs (and governments) make long-term investments and make huge profits in doing so.
The last time the UK had a Labour government was in 2010. No one had heard of Airbnb or Uber then, SaaS was booming and the term “deep tech” was virtually unheard of.
Over the last decade or so, the technology industry has begun to realize that lasting change in growth and positive impact cannot be achieved through software development alone — it is major technological advances in the underlying engineering that will drive not only immense value creation, but also long-term societal benefit.
For example, the rapid growth of SaaS companies was driven by fundamental growth in computing power, underpinned by semiconductor developments and the emergence of scale-out cloud computing. Twenty or thirty years ago, companies such as Arm, the UK semiconductor leader, were innovative, small, venture- or government-backed teams led by ambitious, visionary founders.
There are early-stage technologies today that will have the same level of impact. To take a case study in the evolution of computing and understand where it will be in 20 years, we need to look at the next frontier of computing: quantum computing.
Quantum computing is completely different from how we’ve computed before. Current computing advances allow us to create “digital twins” of our macroscopic worlds, from financial services to aviation. Quantum computing will enable us to create digital twins of the world at a very small scale, one day allowing us to design and predict how atoms will come together to form everything around us.
Quantum computing offers additional GBP 1.3 trillion Not only will it impact global GDP through sectors such as automotive, chemicals, financial services and life sciences, but it will also be one of the best and most important tools to fight some of the world’s biggest challenges, such as the climate and energy crises.
The UK has historically been a world leader in quantum mechanics. Much of what we know today as quantum mechanics was developed in the UK, particularly at the world-famous Cavendish Laboratory at the University of Cambridge, famously home to Paul Dirac, one of the godfathers of quantum computing. This academic leadership is exactly what attracted me to the UK as an international student in the first place.
The UK laid its foundations strategically, becoming the first country to launch a £1 billion National Quantum Strategy in 2013. The strategy consisted of a 10-year plan to move UK quantum from academia to industry. The strategy backed deep tech savvy venture capital firms such as Cambridge’s Amadeus and Oxford Science Ventures. This has resulted in multiple quantum spin-out companies that are considered global leaders across the quantum computing stack. These companies have raised tens of millions of pounds each in seed and series A rounds, employ thousands in the UK and are ready to scale and bring these incredible technologies to market.
This is already starting to pay off: venture capital funding into quantum startups in the UK and wider EMEA has significantly outpaced the levels of capital flowing into the US cross-border sector. Funding raised for EMEA quantum startups: the We ($781 million vs. $240 million). EMEA startups therefore cash out almost two-thirds of the $1.2 billion that global VCs will invest in the sector in 2023. The interest, aptitude and commitment of private investors to quantum potential in the UK and across EMEA is clear.
In February 2023, the previous Conservative government committed a further £2.5 billion to be strategically allocated over 10 years to support UK quantum research. The goal of this funding was to achieve five ambitious “quantum missions”, each with the potential to bring significant benefits to society. Although announced, it has not yet been allocated. The government is currently undergoing a one-year spending review, with a multi-year spending review due to take place in the spring.
Now these world-leading startups are seeking Series B and C funding, a point where UK and European funds have traditionally been notoriously too small to lead these types of rounds. When major technological breakthroughs happen, they can bring about new economic realities. There will be a new NVIDIA or Microsoft of quantum, and it is very likely that one or more of these will come from the UK today. We are at a point in the quantum technology cycle where we will really start to see hockey stick-shaped growth very soon, bringing hundreds of millions of dollars in benefits to the UK over the next decade, creating a flywheel of innovation in the process. But only if we stay on the path.
The New Labour government must build on its successes so far and continue to invest in enabling and scaling world-changing innovations, not reducing investment in the winners to play it safe. Governments, investors and founders need to decide whether they want to invest to win, or simply not to lose.
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