UK Deep Tech Faces Major Variety Difficulty, Royal Academy of Engineering Discovers

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< img src ="https://assets.techrepublic.com/uploads/2024/01/tr_20240103-uk-deep-tech-diversity-challenge.jpg"alt="" > A report published by the U.K.’s Royal Academy of Engineering has actually found that less than one in 10 of the nation’s deep tech companies is founded by all-female groups, highlighting a stark gender variation that could impede growth in the sector if not resolved.

The State of U.K. Deep Tech report discovered that 77.1% of establishing teams are all male, compared to 15% that are mixed gender and 7.5% that are established solely by females. The report associated the variation in part to the low percentage of females studying STEM topics in the U.K., while also highlighting wider challenges in the investor landscape that are impacting female entrepreneurs and possible creators.

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The U.K.’s deep tech variety obstacle

According to the report, the U.K. is home to nearly 3,500 active deep tech companies, 87.2% (3,018) of which are based in England, and the bulk are concentrated in London and the South East of England. These business brought in an overall of ₤ 5.22 billion ($6.6 bn) in 2022, with areas including artificial intelligence, cleantech, quantum computing and VR/AR seeing increased focus from both founders and investors.

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Nevertheless, the lack of variety in deep tech starting groups (Figure A) positions potential difficulties for the sector, especially in regards to innovation capacity and access to diverse markets and viewpoints.

Figure A

Circle charts showing deep tech founding teams in the U.K. are heavily male dominated. Deep tech founding groups in the U.K. are greatly male controlled. Image: Royal Academy of Engineering and Beauhurst While representation among executive and senior management groups are more varied– with 39.6% of U.K. deep tech firms having mixed-gender groups– 56.7% are all male. This indicates just 3.5% of all deep tech companies are led by all-female groups (Figure B).

Figure B

Less than 4% of U.K. deep tech companies are led by all-female teams. Less than 4%of U.K. deep tech business are led by all-female teams. Image: Royal Academy of Engineering and Beauhurst A familiar tech variety problem The Royal Academy of Engineering’s report echoes findings released by the Alan Turing Institute in October 2023, which discovered that AI startups founded by all-female groups represented simply 2.1% of financing offers between 2012 and 2022. These all-female groups have actually protected just a mere 0.3% of the ₤ 69.5 billion ($87.9 bn) of VC financing raised by AI startups during that duration.

While the RAEng report kept in mind that gender diversity was “improving amongst deep tech companies as they grow and broaden beyond their initial starting groups,” it likewise highlighted the historically low participation of ladies and girls studying STEM subjects in the U.K. as a factor behind the absence of female representation.

This has actually seen an uptick recently and may enhance the variety of deep tech creators in the coming years, the report stated. Nevertheless, it likewise recommends that this gap may partially stem from financier biases, highlighting the requirement for stronger support systems for female entrepreneurs.

Ana Avaliani, director of the Royal Academy of Engineering’s Enterprise Center, stated in a press release: “While there is much to celebrate, the State of U.K. Deep Tech underlines the crucial work still to be done to support deep tech creators to scale and grow their business in the U.K. It is likewise essential for a more effective, inclusive community that the gender imbalance in deep tech leadership is addressed which management variety in deep tech enterprises is championed.”

The benefits of increasing variety

Numerous reports for many years have highlighted the advantages of improving diversity, equity and inclusion within companies in regards to boosting workplace culture and task satisfaction, in addition to the performance of business itself.

According to McKinsey’s 2023 report, Variety matters much more: The case for holistic impact, business in the top quartile for gender diversity on executive teams are 39% more likely to outshine their peers financially, compared to 15% in 2015. Likewise, companies in the top quartile for board-gender diversity are 27% more likely to outperform financially than those in the bottom quartile.

How to increase female involvement in deep tech

RAEng’s report underscored the need for targeted initiatives and policy changes to motivate greater female participation and management in deep tech, which might result in more diverse point of views and development in the sector.

To address this, the report recommended increasing support for females business owners, potentially through targeted funding, mentorship programs and networking opportunities. In addition, promoting STEM education amongst ladies and females can help increase the pool of possible female creators in the future.

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Discussing the report, Michelle Donelan, the U.K.’s science and innovation secretary, said she was “devoted to improving STEM uptake among people from all backgrounds, to guarantee everybody can satisfy their potential as we construct a highly proficient workforce in the industries of the future.”

Donelan added: “We are an international leader in artificial intelligence, quantum computing and other emerging forms of deep tech. To keep this position, we are working closely with partners like the Royal Academy of Engineering to harness talent up and down our nation.”

Avaliani told TechRepublic via email that a lack of financial support and gender predispositions provided two of the greatest difficulties faced by women entrepreneurs, pointing out a report by Beauhurst that discovered that less than 2p (2.5 cents) in every ₤ 1 of U.K. equity financing went to all-female creator services in 2022.

“Financiers and services can use significant help by backing women-led organizations, giving them an opportunity to bring more varied product or services to market and deliver monetary and financial advantages,” Avaliani stated.

Removing barriers, improving access to networks and commemorating role models are also crucial methods to improve gender diversity in the deep tech sector, Avaliani said, indicating initiatives like Variety VC and Future VC, which concentrate on increasing variety in the equity capital process.

“Variety in the financial investment community is still doing not have,” she added.

“Considerable systemic changes are required to deliver the action change that is needed if we are to move the needle. This goes from hiring diverse talent to purchasing creators from underrepresented groups to gathering diversity information of portfolio companies, variety of their own groups and committing to measuring progress.”

At a glimpse: The U.K.’s deep tech sector

The report found that cleantech and AI presently dominate the U.K.’s deep tech sector, represented by 517 business and 504 business, respectively.

AI is being extensively leveraged for applications like manufacturing and drugs discovery, the report stated, with the U.K. government investing greatly in AI efforts in recent months.

The growing seriousness to take on ecological challenges is also driving need for the U.K.’s sophisticated innovation sector, specifically in cleantech, tidy energy generation and energy reduction tech, the report said.

This has actually been triggered in part by strong governmental and regulative backing, with the U.K. Department for Organization, Energy & Industrial Method’s Energy Innovation Programme having allocated ₤ 505 million ($638m) to fund the commercialisation of tidy energy innovations from 2015-2021.

The report pointed to broader financing challenges in the U.K. deep tech sector. While equity financial investment in deep tech has grown substantially over the last decade– from ₤ 174 million ($220m) to more than ₤ 5 billion ($6.3 bn)– 2022 saw a slight decrease in the overall number of offers.

RAEng stated this was due to “a complex funding environment” and larger economic challenges that suggested financiers were being more careful with their money.

Report approach

The State of U.K. Deep Tech report was based on data commissioned from Beauhurst, a data platform that provides details on private business in the U.K.

Companies in the U.K.’s deep tech sector were determined utilizing Beauhurst’s high-growth tracking requirements, that includes aspects like equity investment, accelerator presence and academic spinouts. The report included business included on or after January 1, 2013, which were categorized based on specific Basic Industrial Classification codes or sector classifications relevant to deep tech. Companies providing consultancy services or pure software were not included.

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