The UK and Europe have long been criticized for their inability to provide the same level of growth funding to later-stage startups as the US, a fact that is supported by data from the European Investment Fund, which shows that there are at least seven times more large-size VC funds in the US than in Europe. The emergence of a new growth fund in the UK is therefore a notable development.

Cambridge Innovation Capital (CIC), a firm that exclusively invests in the Cambridge ecosystem, has launched a new £100 million ($126 million) ‘Opportunity Fund’, a growth fund that will focus on supporting later-stage companies. With $757 million already invested in over 40 companies, CIC has a unique relationship with the University of Cambridge, providing it with unparalleled access to emerging talent and technologies.

The fund has received significant backing from major investors, including Aviva Investors and British Patient Capital, and will focus on providing growth-stage funding to deep tech and life sciences companies. This investment strategy is designed to address the long-standing funding gap that has hindered the growth of UK startups, often forcing them to seek funding abroad, particularly in the US.

CIC has already made two investments from the new fund, including Pragmatic Semiconductor, a leading chip designer and manufacturer that has raised $389.3 million to date, and Riverlane, a quantum computing error correction company that has raised $120.7 million. These investments demonstrate the fund’s commitment to supporting innovative, high-growth companies in the deep tech and life sciences sectors.

The Opportunity Fund will invest up to £20 million ($25.2 million) per investment, providing critical funding to later-stage companies that are driving innovation and growth in the UK. By addressing the funding gap, CIC hopes to prevent UK startups from being forced to seek funding abroad, thereby retaining talent and economic growth within the country.

The UK government has also recognized the need to address the funding gap, recently announcing its “AI Action Plan”, a comprehensive strategy to grow the economy using AI, including a pledge to build Europe’s “Silicon Valley” by super-charging the existing tech ecosystems around Oxford and Cambridge universities. The plan also includes a package of £14 billion in funding and enhanced links between the “Golden Triangle” of London, Oxford, and Cambridge, comprising five leading UK universities.

According to Andrew Williamson, Managing Partner at CIC, the firm has traditionally focused on early-stage investments, but has increasingly seen companies mature into proven technologies, requiring later-stage funding. “Historically, what we’ve done is when our companies get to Series C stage… we didn’t have the capital in our core funds to make those [later stage] investments,” he explained.

Williamson noted that CIC would often offer co-investment opportunities to its limited partners (LPs), but many institutions, particularly financial institutions, are not set up to make direct investments into companies. The new Opportunity Fund provides a solution to this issue, allowing LPs to participate in later-stage investments through the fund.

The UK government has directed the British Business Bank to address the later-stage gap in scale-up capital, and the Opportunity Fund is a key part of this initiative. Williamson highlighted that Aviva, one of the fund’s anchor investors, is a signatory to the Mansion House Compact, which aims to allocate pension fund capital into productive growth assets.

CIC’s portfolio has already seen several successful exits, including the sale of gene therapy company Gyroscope Therapeutics to Novartis for $1.5 billion, the $285 million acquisition of pet treatment developer PetMedix by Zoetis, and the sale of liquid biopsy platform Inivata to NeoGenomics for $390 million. These exits demonstrate the potential for growth and returns on investment in the Cambridge ecosystem.

Cambridge is renowned for producing several significant companies, including ARM Holdings, Abcam, Darktrace, and Bicycle Therapeutics, and CIC’s new Opportunity Fund is well-positioned to support the next generation of innovative companies emerging from this vibrant ecosystem.