‘Deep-Tech’ Founders-Turned-Investors Forge VC Powerhouse

‘We’re building the VC firm we wish we’d had as technical founders’.

UK early-stage deep-tech VC firm SCVC focuses on tech start-ups coming from the UK’s world-leading academic institutions.

Deep tech is a sector providing solutions to scientific or engineering challenges. The SCVC mission is to create global impact for people and planet, leveraging its expertise – and it has recently partnered with John Williams.

SCVC is the official venture arm of Science Creates, and Williams is best known for co-founding UK-Japanese billion-dollar tech company Kudan. It paved the way for augmented reality (AR) – and achieved unicorn status at its 2018 Tokyo IPO.

Williams will work alongside Harry Destecroix, SCVC’s managing partner and the founder of Ziylo, which topped the rankings of deep tech acquisitions when it was picked up by Novo Nordisk for up to $800m for its smart insulin technology.

SCVC focuses on deep-tech spin-outs: science and engineering discoveries that transition from research institutions into start-ups capable of delivering global impacts for healthcare and sustainability.

With Williams on the team, SCVC is poised to become the UK’s foremost early-stage, deep-tech investor. It backs some of the country’s most promising quantum and biotech newcomers, including Delta g, Scarlet Therapeutics, and Forefront RF. Last year, it announced the first close of its second deep-tech fund that had a $100m target.

SCVC’s foundations are similar to the founder-led VCs of Silicon Valley, such as a16z and Founders Fund, started by PayPal pioneer Peter Thiel and Netscape founder Marc Andreessen respectively.

Research shows that exited founder-led-VCs have higher success rates for investment than other VC categories. And successful founder-led VCs in Europe are rare. Only eight percent are said to have the relevant experience. This contrasts with the US, where the majority of VCs – 60 percent – previously operated a start-up.

There’s a significant difference between working in a start-up, founding one, and founding and exiting one that returns money to investors. The majority of start-ups aren’t built off a decade of advanced research, and most of the risk is technical, rather than market-related.

“The partnership of two exited founders in a UK company is rare,” said Williams, “but what is even more unusual – and, in our opinion, essential for any successful deep-tech VC – is that the partners themselves are original inventors of the technologies.

“At SCVC, we leverage our backgrounds to really understand the technology in its pure state, and work to identify the product that best leverages the technology’s strengths before even considering the market.

“This technology product-fit model is unique to SCVC.”

Williams believes there is an enormous opportunity afoot. While the UK has some of the best research in the world, it has just half the patenting rate, per capita, of the US – despite a higher publication rate. “This is compounded by a lower commercialisation rate,” he said, “demonstrating that most of our UK deep-tech opportunities are still trapped within academia.

“Because of this, we don’t have a zero-sum game mentality. We’re barely scratching the surface of how many more start-ups we could be making, and how much more investment is needed. The capital and investor base is rate-limiting. We believe in collaboration, and want to actively work with VCs of all backgrounds.”

Major scientific breakthroughs at universities can be problematic because research is often conducted in isolation without considering a commercial fit. “It’s presented as a hard-to-understand technology with no real context, or worse, chasing a popular, but inappropriate market.”

It’s sad to see great technology die, either stuck in a university or in a start-up where it never really had a chance, laments Williams. “Too many VCs will wait until a later stage to provide capital, where there is more of a business plan and some traction that’s easier to analyse.

“But many don’t make it that far, or they alter the company’s strategy to bait investors into believing it addresses current hype.” That’s why it’s advantageous for a VC with a technical-founder background, he says. “They’ve lived and breathed the challenges of turning an idea into reality.

“It’s an untapped opportunity in the UK, so we encourage more founders to enter the VC space. As well as exited founders, it is also important to have more people with STEM backgrounds in VC. This is particularly true in deep tech, where the technological risk typically outweighs the market risk. ”

Williams, Destecroix and the SCVC team have expertise in biotech, quantum, semiconductors and AI – the key areas that the UK government has identified in its strategy to unleash the country’s full potential as a “science and technology superpower”.
Destecroix says the fund has a unique investment thesis: “Deep-tech start-ups are society’s most effective economic vehicle to deliver innovation and global impact for the health of people and the health of our planet.

“In case you missed it, the Fourth Industrial Revolution is already here. This is powered not by a single breakthrough technology, but by the combinations of several at the right moment.”

This is thanks to the convergence of biotech, quantum and AI research, he says. “Biology and quantum-sensing are the biggest untapped data sources in the world, and recent advances in AI are beginning to unlock this massive potential.

“John was a visionary in AI and sensing, and our thesis has naturally grown out of hundreds of hours of discussions where we’ve crossed over into each other’s areas of expertise.”

John Williams left school at 17 to grow tech firm Kudan with veteran Japanese businessman and friend Tomo Ohno. The goal was to continually push the state-of-the-art tech and capture the era’s most successful apps.

As AR became more mainstream, the company repurposed its core technology to create “artificial perception”, AI that allows self-driving cars, robots and drones to “understand” the world around them. It set Kudan up for its IPO on the Tokyo Stock Exchange; the first trading day resulted in the price soaring three-fold without a share being traded, exceeding its billion-dollar valuation.

Harry Destecroix was the founder of Science Creates, the ecosystem that pairs venture funding with deep-tech incubators and start-up accelerator programmes. The project was backed by government funding from UKRI and a charity which trains young tech entrepreneurs. He says Science Creates came “out of necessity” when Ziylo couldn’t find lab space to rent in Bristol.

Destecroix is an expert in deep-tech spinouts, and an adviser to the UK government. His Science Creates generates an annual GVA of more than £125m, and has supported some 100 start-ups. It is also home to UKRI’s national engineering biology accelerator programme.

Science Creates now has 26 full-time staff members – and SCVC is reckoned to be one of the most well-resourced early-stage deep-tech VCs for spin-outs in Europe.