16/02/2022 16:41
By 2019, 9 out of the 10 largest companies globally, defined by market capitalisation, were catalysed by venture capital (VC). Including Apple, Microsoft and Tesla, they’re all major players generating millions of jobs annually and trillions in market value. And what do all of these companies have in common? They are science, technology, engineering and maths (STEM)-based.
A brief history of STEM and VC
STEM and venture finance have been closely related since VC began. The Manhattan Project (1939-1946) and the first modern VC firm: American Research and Development Corporation (ARDC), invested in technologies being developed during World War II. This close relationship originates from STEM and venture capital’s joint mission: to drive innovation and technology.
Today, STEM research and companies look more to venture capital to scale up and commercialise. On top of this, venture capital in the UK has been increasing at an exponential rate. According to a 2021 Tech Nation report, the UK venture capital ecosystem has grown 10 times over: from £0.9 billion in 2010 to more than £11 billion in 2020.
The future of STEM in the VC ecosystem
At the core, careers in STEM and venture capital require many similar skills. These include problem-solving, critical thinking, innovation and communication. Consequently, VCs are focusing on developing a deep talent pool of finance professionals with investment, technical and entrepreneurial experience to support STEM companies to scale up. This has instigated a significant shift away from typical VC profiles predominantly coming from consulting, general finance or investment banking backgrounds.
Equally, STEM founders must gain experience in investment, finance and negotiation to help bridge the ‘knowledge gap’ between innovators and investors. This will allow investors to better assess the technical and financial viability of companies or ideas.
According to statistics published by UCAS in 2021, the number of students taking STEM subjects at university is at an all-time high in the UK. This includes areas of focus for deep tech. There’s been a 400% increase in students wishing to study artificial intelligence courses.
Additionally, acceptances into computer science courses rose by almost 50%, from 20,420 in 2011 to 30,090 in 2020. As a result, there is a strong pipeline of potential talent to create or invest in the STEM unicorns of tomorrow.
What's Newton Venture Program got to do with it?
Newton Venture Program helps you make sense of the venture capital world with a mission to enable a thriving, inclusive and innovative venture capital ecosystem and make the practice of venture capital and technology transfer globally widespread and accessible.
Newton aims to improve the end-to-end journey through which venture capital flows, from LP to TTOs worldwide. Through our programs, we connect STEM professionals to the venture ecosystem, helping to bridge the innovation gap and bringing potential for more backing of STEM-based ventures.
See our dedicated page on STEM to VC here including event recaps and a report exploring the educational background of founders and investors at STEM companies.