NESTA Annual Review February 09

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Annual Review 2008

What impact

does NESTAmake?


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We aredemonstratinghow bold newideas can meet

the UKs toughestchallenges.


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NESTA

NESTA is the National Endowment for Science, Technologyand the Arts a unique and independent body with a missionto make the UK more innovative.

We invest in early-stage companies, inform policy, and deliverpractical programmes that inspire others to solve the bigchallenges of the future.

Our independence and ability to work across differentsectors allow us to bring together ideas from a wide rangeof perspectives. And because we can take a longer-term view,we are able to assume a greater burden of risk than others.

NESTA does not work alone. Our success depends on thestrength of the partnerships we form with innovators,policymakers, community organisations, educators and otherinvestors. We bring the best ideas, new flows of capital and

talented people together, and encourage others to developthem further.

NESTA1 Plough PlaceLondonEC4A 1DE

Telephone 020 7438 2500www.nesta.org.uk

We also have an office in Dundee and representativesin Scotland, Wales and Northern Ireland.

ISBN978-1-84875-032-6

DesignBostock and Pollitt Limited, London

PhotographyLee MawdsleyAngus Bremner

PrintQuadracolourThis report is printed on FSC accreditedpaper which is Elemental Chlorine Free(ECF). The paper is manufacturedto ISO 14001standards with the rawmaterials purchased from suppliersoperating sustainable forest reserves.


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NESTA Annual Review 2008 1

Contents

Why should anyone listen to NESTA? 2 Chairmans introduction

What does impact mean? 4 Chief Executives review

But how is NESTA and innovation relevant? 8 Public services

So do you work solely in thepublic sector? 14 Corporate innovation

What about small creative businesses? 20 Creative economy

Giving advice is easy but what practicalexperience does NESTA itself have? 26 Commercial investment

Are the conventional boundariesbetween public, private and voluntarystill relevant? 32 Social investment

How do we know if any of this work

is actually making a difference to the UKseconomic performance? 36 Measuring innovation

Should the UK be trying to createits own versions of Silicon Valley? 40 Place

42 Board of Trustees and Committees

44 Our year


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2 NESTA Annual Review 2008

Chairmans introduction

Why should anyone listen to NESTA?

The necessity to cut costs in a recession such as this can make itdifficult to think beyond the immediate needs of survival. But, ofcourse, recessions create successes amongst those who have plannednot only to survive the downturn but to come out the other side ina stronger position.

With less money around in commerce and in public services, it is theinnovators who find the way to get ahead.

It is timely, then, that NESTAs programmes, research and investmentsare producing practical insights into innovative approaches thatbusiness, public services, investors, government and others can use

for economic and social benefit.

Indeed much of our experimental work is now at a stage where,proven on a small scale, it is ready to be broadened out. We willincreasingly be encouraging partners with greater resources thanwe have to take the work on.

As you will see, NESTAs reach is broad: Our investment support to start-up companies is demonstrating

how cash at a critical stage, often combined with NESTA-sourcedmanagement, can make early-stage enterprises more likelyto succeed.

Open innovation programmes are helping to create new products

and ventures in large companies by harnessing inventivenessfrom outside the company. The Big Green Challenge is showing how communities can

come together to generate energy savings in imaginative ways. NESTAs comprehensive research programme points the way for

public policy to provide a more productive climate for innovation.

As the DIUS White Paper Innovation Nation trailed in 2007, weled the establishment of two major projects in 2008: an InnovationIndex (see p.37) to provide metrics for judging progress and guidinginnovation policy; and The Lab (see p.11), to experiment with waysto overcome multiple barriers to new ways of thinking in the deliveryof public services. A third outcome of the White Paper, the InnovationResearch Centre, is a collaboration between NESTA, the Economicand Social Research Council, DIUS and the Technology StrategyBoard, which will commission research into the role, drivers andimpact of innovation.

We are building a detailedknowledge of how innovationworks best in the UK.

We have been enormously helped by the two Advisory Boardswe recruited for these tasks, led by Lord Currie (the Index) andSir David Henshaw (The Lab). Indeed, NESTA receives tremendouslyexperienced and skilled help from a wide range of non-executives(whose profiles appear on p.42). Two Dr Stuart Cosgrove andProfessor William Morris concluded their terms in 2008, and werecord our thanks to them for their guidance over the past four years.

The energy of Jonathan Kestenbaum and his staff sets a palpablepace and vibrancy to the organisation which, I believe you willagree in reading this review, sets the UK in better stead to reboundstrongly when the current stringency abates.

Sir Chris Powell

Chairman


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Chief Executives review

What does impact mean?

The UK began 2008 facing some significant long-term challenges not least continuing economic turbulence, environmental threats andhuge demographic changes. It became increasingly clear as the yearwent on that we also face an acute immediate challenge in the formof the credit crunch and subsequent recession.

Challenges of this scale need new ideas and new approaches.On that everyone can agree. The question is: what can government,companies and individuals do to encourage those new ideas?

Impact means producing

results practical ideas thatothers can use, at a time whenbold new thinking is critical.

Some might answer: Nothing someone either has a new ideaor they dont. Our work at NESTA demonstrates that such an answeris wrong. Innovative approaches to problems require much morethan a lone genius with a flash of inspiration. Some environmentshelp new ideas to emerge; other environments discourage new ideas.And once the ideas exist, some environments help them spread and

some environments kill them off.

We want to demonstrate what makes new ideas and approachesmore likely to appear and more likely to flourish. The aim is to developa series of models sets of practical insights that show what wecan do to improve the UKs ability to come up with, and successfullyexploit, new ideas.

Our models span a wide range of areas. This was a conscious decision.We do not think that innovation is or should be confined to certaincreative sectors of the economy. On the contrary, new ideas happeneverywhere in businesses, in public services, in communities, inuniversities, and in schools.

We see over and over again that innovation arises out of diversityand difference. So our methods try to bring a diversity of insight.We combine research with practical experimentation funding ideason the ground and spreading their success.

This review is about what we have learnt so far.

Jonathan Kestenbaum

Chief Executive



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NESTA has been incredibly supportiveto us as an investor. Weve been impressedby their ability to offer relevant assistanceand guidance when needed, also by theirconfidence in us.Dan Hon, Six to Start

With 50 million of our 400 millionendowment now being invested in start-upbusinesses, and 10 million available toinvest every year, NESTA is now the UKssingle biggest seed capital investor. One ofour recent new investments was in Six to Start,an alternative reality games company run byDan Hon (pictured, left). Weve taken a 12.5%stake in the business, which is already workingwith Penguin to develop six online multimediastories. The firm also has projects underwaywith Channel 4, the BBC and Puffin.


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But how is NESTA and innovation relevant?


Public services


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The whole of the UKwill benefit from whatwe do look at our

work to shape thepublic services we allneed for the future.



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Public services continued

Public services such as health, education, transport and socialservices face a much tougher financial environment over the

next five years.

Moreover, they face substantial long-term challenges in theshape of climate change, rising levels of immigration, and an ageingpopulation. In the past, governments have reacted to such changesby trying to improve existing systems and structures. However,to deal with the scale and nature of change that we are facing inthe 21st century, traditional solutions alone will not be enough.Fresh thinking is urgently needed. We cannot continue to tinkerat the edges, particularly in the face of recession.

During 2008, NESTA has worked to understand where these new andradical solutions might come from, and how they could actually beput into practice. In particular, we set up projects to explore whether

those outside the management structures frontline workers, usersof services or community groups, with their close experience ofdelivery could be a source of this new thinking. This notion has beenmuch talked about in government for ten years now. But it has proveddifficult to get it to work in practice. Our projects aim to find out why.

Our Innovations in Mental Health project challenged frontline workers,service users and carers to come up with new ways to deliver mentalhealth services that could with the right support become nationalprojects with real impact. Eleven projects were selected and are nowbeing piloted. Our partners in this project were the Mental HealthFoundation, Mental Health Media, Mind, Rethink and the SainsburyCentre for Mental Health.

The Health Launchpad, a joint initiative with the Young Foundation,focused on using social enterprises and social entrepreneurs to helpreduce the strain on the NHS by shifting the focus of care for long-term conditions from hospitals to the community. Social enterprises(see p.33) are particularly well-suited to do this they have thesocial or environmental aims of a charity, but are run in the same wayas a mainstream profit-making business. The Launchpad is alreadysupporting a number of new healthcare ventures, both commercialand not-for-profit.

The Big Green Challenge is a 1 million prize fund from NESTAthat challenged groups of people to find new ways of reducingCO2 emissions in their communities. Launched in October 2007,the Big Green Challenge attracted more than 350 applicants.During 2008, we supported 100 of the most promising groups todevelop their ideas into detailed delivery plans. Ten finalists wereselected, and they are now putting their ideas into practice overthe course of 12 months.

The experience of these projects, coupled with our wider research,has yielded some powerful lessons.

We found that frontline workers and users are full of clever new ideas.We have no doubt that this is true right across public services andthat those new ideas could transform public services for the better.

At the same time, we found that in many instances the ideas arebeing blocked by middle management. This is not a new finding.But to date there have been few solutions. Some have arguedthat a strong and visionary senior manager is needed to breakthrough this opposition. But our work suggests that, while seniormanagement support is valuable, it will never be enough on its own.Even if users or frontline workers with a new idea manage to reacha senior manager, he or she will not have the time to shepherd theidea through the organisation.

It seems that it may be a mistake to see middle managers as theenemy. They need to be part of the solution. In a number of ourprojects, innovations from the front line were successful preciselybecause they found a supportive middle manager. This personcould give the idea more time, and typically dealt with preciselythe sorts of issue the need to meet targets, the need toconform to administrative processes that were the barriersto innovation in the first place. So if we want new ideas in ourpublic services, we have to find ways to co-opt that crucialmiddle layer of management.


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We also found that bringing new ideas to bear on social problemsneeds realism as well as ambition. Frontline innovators have towork with the culture and mindset of the organisation and not inflat contradiction to it. Take the example of mental health services.They are focused strongly on risk minimisation. A working-levelinnovator in mental health who attempts to work on the basisof a different paradigm will not make progress.

That is not to say radical change is impossible. On the contrary,it is often what the service needs. But it has to happen in stages.

Our work on involving community groups has also revealed a great

deal. Like frontline workers, community groups are frequently ignored.We found that they were buzzing with ideas. And those ideas arenot simply about the short-term or the small-scale. On the contrary,local communities are not short of long-term vision. That vision justneeds supporting.

With the Big Green Challenge, we have learnt that a challengeprize if structured correctly is a very effective way of providingthe needed support. We have heard from participating communitygroups that the programme gave them not only a sense of urgencyand focus for taking their ideas forward, but also the space andpermission to shift from short-term thinking (e.g. applying for moretraditional forms of funding) to longer-term, more ambitious thinking.

We also learnt other, less obvious, lessons about the power of offeringa prize. Prize funds have been much talked about recently as a meansof unlocking innovative ideas relatively cheaply. We found that theyare also a very powerful tool of research and consultation. Centralgovernment often struggles to understand what is happening outthere in local communities and regions. Our experience is that runninga properly structured prize process generates a tremendous amountof rich information about the environment in which the participantsare operating. We have also learnt a great deal about the interactionof local government, planning law and procurement.

The latter part of 2008 was spent pulling together plans for The Lab NESTAs Public Services Innovation Laboratory which will take thiswork to the next level. It is a new programme, designed to providethe freedom, flexible capital and expertise to test radical new ideasfor tackling our most pressing social challenges.

It will trial practical ways of fostering radical responses to someof our most pressing social challenges. By experimenting and learning,The Lab will build a body of evidence about how to approachinnovation in public services. It will help create wider capacity fornew ways of working, by sharing what works and facilitating learning.The Lab is not a physical space or an institution it is a set of

practical projects delivered with and through partners who, likeNESTA, are grappling with how to develop radical new solutionsfor the benefit of citizens.

By the time of our next Annual Review, The Lab will form a significantpart of NESTAs work, and we are confident it will already be havingan impact on public services and social issues more widely.

An ageing UK

One in three people in the UK is now aged over 50,and in 2008, for the first time, there were more over-60s than young people aged under 16. The UKsageing society is placing increasingly acute demandson the provision of existing public services such ashealth and care services and creating pressure for

new, better and more personalised types of services.

A major strand of The Lab has been designed totackle this challenge. Age Unlimited, which willlaunch in early 2009, targets people in their fiftiesand over, experimenting with more flexible andinnovative approaches to employment, leisure,self-help and independent living.


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NESTA was able to support us in ouruser-led innovation initiative and showus new ways of how we could workwith our customers to generate ideas.Allison Wightman, Virgin Atlantic

Allison Wightman is one of the key members

of the Virgin Atlantic team working with us onV-Jam. Virgin is famous for its willingness to trynew ideas, and experiment with different waysof doing things, which makes it an ideal partnerfor a project like this. We wanted a real-lifeproject to experiment with user-led approachesto innovation; Virgin wanted to get closerto its customers and use their insights to helpdevelop new products and services. So far it isproving to be the perfect pilot.


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So do you work solelyin the public sector?

Corporate innovation


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We are just as activein the private sector,working with

companies to helpthem unlock theirown innovative ideas.


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Corporate innovation continued

The economic environment in which companies operatechanged radically over the course of 2008. With it,

corporate priorities have inevitably had to change too.

But we do not think that innovation is off the corporate agenda.On the contrary, many companies need innovation more than ever.But it will have to be innovation that delivers immediate value tocustomers and customers who typically have less to spend.

The new ideas that enable companies to innovate do not necessarilycome from new inventions or technology, but rather from usingnew business models to extract value from existing technologies for example, the low-cost airline, or the pre-paid mobile phone.

However, actually generating those new ideas is not straightforward.It is no coincidence that those sorts of disruptive innovations are

often created by new entrants to an industry. Existing companiesfind it difficult to think outside established patterns of working.

A potentially exciting way of tackling this is to use open processesof innovation, in which external partners and collaborators areencouraged to offer their own input and ideas. It can lead to radicalbreakthroughs and the accelerated development of products, asthe example of Apples iPod and iTunes shows. An open innovationprocess involving (among others) Apple, PortalPlayer, WolfsonElectronics, Toshiba and Texas Instruments, created the now-iconicmusic player in six months. High-profile organisations such as Philips,the BBC and Nokia have also applied open innovation models togood effect. But it is not straightforward.

We spent 2008 working with corporates in a variety of differentenvironments. These were designed to explore various aspectsof the challenges of open innovation and how to overcome them.The same underlying issue continually re-emerged in different forms:how to create the right environment of trust, which is essential beforecompanies can be expected to share their ideas. Open innovationcannot happen without it, yet trust is not easy to create. Standardways of doing business, such as detailed contracts, often do thevery opposite.

One way we found was to bring together companies from verydifferent sectors to work on common problems. CorporateConnections which builds on an existing network called H-I Network involves a series of collaborative workshops with a wide rangeof companies, including AXA, GlaxoSmithKline, Procter & Gamble,E.ON, Philips and QinetiQ. Networking and relationship-building wereimportant by-products of the programme, but the real aim was togive the participants the chance to work together on common issuesfor mutual benefit, or share proprietary technologies with the aimof finding practical new applications.

One particular advantage of NESTAs approach is that it offers

the chance for major corporations to collaborate with each other whereas the open innovation processes set up by companies intheir own right tend to involve only the lead business and a lotof much smaller firms. Bringing together companies of the calibreof Procter & Gamble, GlaxoSmithKline, and BASF to work togetheras equals could generate even more spectacular results.

We are also excited by the work we did during 2008 on openinnovation between small and large companies. This raised particularchallenges to begin with. Small and large companies should be naturalpartners. Small companies are often the best source of new ideasand new products for large companies, who have the resources,the credibility and the pre-existing network relationships to sell and

market those ideas. And in theory an innovative SME can havean idea, protect it, and then try selling it to big companies.

But it became clear that in practice it is extremely difficult to do this.Not every innovation can be protected and, even for those that can,it takes considerable time and resources to get to the point of havinga patented, marketable product. SMEs do not have those resources,and they do not have enough insight into whether large firms areinterested in what they have to offer. The SME does not know the rightway into the large businesses who to talk to, how the company cultureworks, how their idea fits with the potential customer needs. Even ifit can overcome those issues, large and small companies cannot simplyshare ideas in an open way. For small companies to sell their innovative

ideas successfully to large companies, both parties need a neutral spacein which they can develop trust.


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Last year we developed a powerful new way of helping SMEsdevelop their ideas and sell them successfully to large organisations.

The basic concept is that of an airlock a safe space in whichideas can be worked up with the necessary input from all sides,whilst mitigating confidential or commercial concerns (see Box).The potential commercial returns from this process are significant.NESTA contributed 125,000 in financial support to the SMEsto help them through this process. The end result was that thecorporate identified ideas worth $200 million in new marketpotential, which they are now actively developing with the SMEswho originated them.

In some of our other projects we explored how to harness creativeideas from end-users and entrepreneurial individuals, often throughdedicated websites and social networks.

The Open Ventures Challenge used this approach to support thefundraising efforts of Cancer Research UK. The charity is inviting peopleacross the UK to come up with new ideas that could generate up to10 million to support its work, with the emphasis on new commercialand collaborative ventures, rather than conventional fundraising. Ideashave already been posted online, and the best will be developed duringthe spring of 2009. The short-listed teams will then compete for start-up funding in front of the charitys venture board.

V-Jam, on the other hand, focuses on how open innovation can be usedin a more targeted way to involve end-users, and make the most of theirideas. Our partner here is Virgin Atlantic, and the aim is to gain newinsights from its customers that may eventually lead to new productsand services in the form of web applications, which the individualsconcerned will help to develop and derive a financial return from.

As with all our projects, the means we are using to do this are justas important as the end result. We are assembling a set of uniqueinsights about how to make user-led innovation actually work,instead of just being a concept in a book.

Airlock

Instead of pitching their innovative idea direct to the potential corporatecustomer, SMEs pitch in the airlock to a partnership of NESTA and otherinnovation brokers who understand the corporate customer. The ideas arenot passed on at this stage.

In this airlock, SMEs feel free to discuss their ideas more openly. They have

the confidence that the corporate cannot steal their ideas before they areready. But they can also gain valuable feedback on whether their ideas havemarket potential.

The top ten per cent of promising ideas are selected by the partnership.It provides the SMEs with some modest financial support to developand protect the ideas. The SME then pitches directly to the corporate.

Managed serendipity

Two of the companies taking part in CorporateConnections McLaren and NATS have, asa result of the programme, started a major newbusiness collaboration in the worldwide air trafficcontrol market, where NATS has established areputation of excellence. NATS is the UK marketleader, providing air traffic services at the UKsmajor airports including Heathrow the worlds

busiest for international traffic.In a remarkable piece of managed serendipity,race control computing developed by F1Champions McLaren is now being adapted toaid the management of aircraft on the ground.This venture into A-CDM (Airports-CollaborativeDecision Making) software could significantlyenhance efficiency and has a global marketplace.

McLaren Applied Technologies is currentlyrecruiting staff to develop the new product.Business Development Director Chris Crockfordsaid: NESTAs Corporate Connections programme

has given McLaren an unexpected opportunityto work with a totally unrelated business.It shows that in the right circumstances the mostinteresting innovations can come from unlikelycollaborations.



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Starter for 6 taught me about financialforecasting, but in a relevant andaccessible way so I could tailor it to whatI was doing. Their expertise enabledme to sort out specifics and progressthe business.Scott Jarvie

Scott Jarvie is a successful Starter for 6entrepreneur. We helped give him the start-upfunding he needed to set up his own business,Jarvie-Design, which is unusual in that it worksboth in 3D (such as furniture and kitchenware)and 2D (such as branding and websitedevelopment). It is the financial disciplinehe learned from Starter for 6 that has madethe most difference for Scott, helping himto balance his own design priorities withthe practical and financial demands ofa growing business.


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What about smallcreative businesses?

Creative economy


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Too many creativestart-ups never reachcritical mass we

are finding out why.


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The creative sector is a vital resource for the UK. It employs overa million people and contributes 60 billion a year to UK plc.In recent years industries like film, music and entertainmenthave grown twice as fast as the economy as a whole.

More than that, the creative industries are crucial to the abilityof the UK to generate new ideas. We have found that creativebusinesses make contributions to innovation that go well beyondtheir own industry. They support and stimulate innovation in othersectors. Businesses in the UK that make heavy use of creative goodsand services in their production processes are much more likelyto introduce new product innovations. We have set up a project

to encourage this sort of cross-sectoral knowledge transferby developing links between creative and non-creative SMEsusing innovation vouchers.

Like other businesses, creative ones are now facing a muchcolder economic climate. In particular, the UK creative economyis characterised by many small firms, few of which ever reacha significant size, and none that could hope to rival global playerslike Disney. Our work in this area has been designed to understandwhy this is the case and what can be done about it.

The start-up phase of creative businesses raises one importantset of issues. In 2008, the Starter for 6 project (which grew out

of NESTAs own Academy programme) continued to deliver training,business advice and mentoring to young Scottish entrepreneurs,building on an established track record of success. Independentevaluation found that it added around 2.16 for every 1 investedfrom public funds. The models and materials that we have developedare now being used by other organisations across the UK, includingthe National Council for Graduate Entrepreneurs, and Skillset, theSector Skills Council for Creative Media.

What makes it so effective? You might think, for example, that effectivebusiness support for new entrepreneurs would be about hiring thebest advisers possible, even if it costs; or that it was about giving theentrepreneurs a really comprehensive mini-MBA business training.

We have found that in fact the exact opposite is the case. Projectsthat experimented with a high-end, high-support approach did notnecessarily create high-value businesses. One of the most powerfuland effective forms of support is to bring the entrepreneurs togetheras a group on a regular basis and even more importantly, set uparrangements for graduates to mentor those going through theprogramme. The chance to talk to people facing the same issues,with the same learning curve to climb, has been more effectivein many cases than contact with a business advisor. It is also usefulto cross-pollinate the programme with innovative businesses fromother sectors to share perspective and learning, because they haveproduct development life cycles which are a) similar and b) quite

different from other types of businesses.

Starter for 6 in particular now has the potential to become afully-fledged network or community of entrepreneurs, with hugepotential not just for learning and support, but for collaborationand business development.

That is not to say that training and advice is irrelevant. Far from it.But we have learnt that typical business advice schemes have toomuch content and try to cover too much. It is much more effectiveto focus ruthlessly on the three or four really key concepts ortechniques that the entrepreneur needs to grasp.

Start-up is just the beginning though. Creative businesses continueto need support as they grow, but their needs are very differentfrom the start-up stage. We have been carrying out research andexperimentation to build practical toolkits for how to do this.

Many people believe that digital technology could be a means forsmall creative companies to reach a wider audience as well as achievehigher sales. We have been testing this in the film sector throughour Take 12 Digital Innovation in Film programme, in partnershipwith the UK Film Council.

Creative economy continued

The practical tools we developed in 2008 to boost corporatecreativity can apply to all sectors of industry. But the creative

sector also has specific challenges of its own. We learnt a greatdeal in 2008 about how it can tackle those.


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The programme is showing that while digital technology doesprovide an opportunity for film businesses to get closer to theiraudience, this is challenging. Digital technology is not a guaranteedroute to make money from film content. Film businesses arelargely unaccustomed to engaging with audiences so directly.

We think that the industry needs to stop assuming that digitaltechnology means that every small producer talks directly to itsaudience. Collaboration will be very important. There appears tobe value in building scale by collaborating with other rights holdersand pooling catalogues, and in doing deals with the gatekeepersof the new digital platforms.

In 2009 we aim to make these insights more robust and to integratethem into an overall model of how to support creative businessesin the growth stage.

Another key issue is convergence. Reports frequently talk abouthow audiences are increasingly choosing to consume content acrossmedia platforms. They usually go on to say that companies coulddevelop new business models based on this. In reality, while somesmall creative businesses are engaging with this, many are missingout. For example, our work in the games sector has shown thatthe UKs strong position in the video games area is declining, partlybecause games companies are not working closely enough with other

types of media businesses and are not doing enough business online.

Gaming, like other parts of the creative sector, produces a great dealof what we have identified as hidden innovation. The games industryis highly innovative (see Box). But it does not usually meet formalcriteria for R&D spending, because studios find it difficult to separateR&D activities from other spending. So no one measures thisinnovation and more importantly, games companies are not eligiblefor tax credits. This is just one example of the crucial importance ofhaving better, broader measures of innovation in the UK, which cancapture the full rich picture of what is actually happening.

Raising our game

One sector of the creative economy that is far moreimportant than it may initially appear is the gamesindustry. Some may dismiss the world of computergaming as a marginal mania, but the gaming industryis a huge opportunity for the UK: we are the thirdlargest video games market in the world and thefourth largest development player. However, thefact that Canada recently overtook Britain for thirdplace largely as a result of heavy government

support is a good indication of the challenges ourown industry is facing. We could stand to benefitsignificantly from the continued growth and widerapplication of gaming technology, but we canonly do this if we can compete effectively againstsome extremely sophisticated and subsidised competition. This will involve addressing some fairlyfundamental challenges, including a shortageof skilled people, and a lack of early-stage financefor both start-ups and more established studios.

Raise the Game is a NESTA initiative launchedin July 2008, which is designed to address many

of these issues. Developed in partnership withTiga, the national trade association for the gamesindustry, Raise the Game is offering active supportto small-scale developers to help them growtheir businesses, and create and exploit their ownintellectual property.



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The commitment of NESTA has beenfundamental to the successful launchof the ground-breaking UMIP PremierFund. NESTAs continuing supportof the Fund is highly valued and willsignificantly contribute to thecommercialisation of intellectual

property emanating from The Universityof Manchester.Peter Sanderson, UMIP

Were one of the leading investors in the UMIPPremier Fund, the largest institutional fundin Europe focused on a single university. Underthe chairmanship of Peter Sanderson (pictured,left, with NESTAs David Hunter), this fundinvests in spin-out businesses from theUniversity of Manchesters world-renownedscience and technology departments.

Over time the fund could reach 50 million,covering some 20 early-stage investments.


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Giving advice is easy but what practicalexperience does

NESTA itself have?

Commercial investment


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We invest in early-stage high-techbusinesses, and

are building adeep knowledgeof what works

and what does not.


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Our investment approach is based on five main premises:1 Commercial return: only by demonstrating that commercial returns

can be made will we attract private investment into the early stage.2 A long-term, sustainable fund: a series of government initiatives

have been launched and come to an end in the last ten years:University Challenge Funds, Regional Venture Capital Funds,Enterprise Capital Funds and so on. NESTA is committed to beinga long-term player in this field.

3 UK-wide scope: NESTAs remit covers the Nations and Regions,and we work at a national, regional and local level.

4 Consistent focus: our agenda is focused solely on understandinghow to encourage early-stage innovative high-growth companies.

We have no other policy objectives and no need to lobby foradditional funding or tax breaks.5 Public and private sector insight: uniquely, we combine practical

deal-making on a fully commercial basis with a public service remitand a research capability. This gives us a unique ability to drawpowerful and convincing lessons.

In 2008 we made six new direct investments (worth a totalof 1,050,000) and nine further investments (worth 969,642),and made a commitment of 500,000 to one fund. We now havea portfolio of 48 investee companies and five investment funds.

The issue of the shortage of finance for innovative start-ups in the

UK has been much discussed over the years. A wide variety of factorshave been cited as possible causes, including some large and systemicones such as City short-termism and a lack of entrepreneurialismin British culture.

It has become increasingly clear to us over the last year that a systemicapproach is correct no one factor explains the problem. But thereis no need to resort to sweeping statements about the UKs financialsystem or its culture. The diagram (right) sets out our understandingof the situation: a vicious circle of mutually reinforcing problems.

Through a mixture of practical experience and academically rigorousresearch, we are testing a series of models which tackle various parts

of this vicious circle.

All agree that growing high-tech businesses need support.The question is what type of support is most valuable. Mentoringhas been popular in this field for some time. We have found that itis most valuable in providing companies with input on specific quasi-technical issues for example, on intellectual property. It is lessuseful as general management support. Mentors rely on goodwillto be heard, and management teams do not always listen to themeven when they should. Our findings are that there is no substitute

for a highly experienced Chair and/or non-executive directors.They can provide the fledgling management team with expertiseand constructive challenge that cannot be ignored.

It would be reasonable to assume that investors in start-up companieswould be professional and effective investors. Surprisingly, we foundthat this was often not the case. For example, the contracts usedby investors in early-stage companies are often either unrealisticallyonerous for the entrepreneurs or too lax, not setting clear performanceexpectations. On other occasions we found them to be overly complex.We have therefore developed a standard template for a contract.

Commercial investment continued

NESTA works very closely with high-tech start-ups invarious ways. Our aims are to demonstrate that a commercial

return is possible in early-stage investments, and to combinepractical experience with research models to promote changein the sector.

Difficultfundraising

Small rounds withinsufficient support

Below averagereturns on funds

High failure ratesand few big hits

Lack of serial entrepreneursand management

Inexperienced management teamsrunning early-stage companies

Shrinking smallseed-stage funds


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We conducted some in-depth quantitative research on the early-stage venture capital market during 2008, backed up by our practicalexperience. It has already generated some important insights.In doing so, it shows how a blending of research and practical insightcan shine a new light on old problems.

For example, policymakers and investors have long agreed thata top-quality management team is vital to the success of a start-up.Observers of the UK investment scene have known for some timethat UK management teams are often not as good as they shouldbe. Understandably enough, they have looked for wider explanationsof this general phenomenon weaknesses in UK management

training, or even a problem with the UKs business culture.

Our work suggests that quite specific features of the market can infact explain this problem. Our research showed that, at the moment,much early-stage investment fails to inject sufficient capital in anyfunding round. This has two important effects. One, it preventscompanies from attracting top-quality management, as they haveonly a small funding runway ahead of them. Two, even if the companydoes have excellent managers, they end up devoting too much timeand energy constantly to raising additional rounds. This distractsthem from their core activities of building their product, service andbusiness. The result either way is poor management performance.

Our work can also explain why this problem of small funding arises.It is in large measure the result of the shift in the structure of fundingtowards business angels and public funds. Both of these tend to lackdeep pockets compared to institutional funds.

We will be conducting more work in the future to understand businessangels better.

Kinetique Fund

Another example of NESTA taking a more proactiverole is our appointment as the manager of theKinetique Biomedical Seed Fund. Weve been theleading start-up investor for many small businessesin the past, and currently have investments in48 companies and five early-stage focused funds,

but this is the first time that weve taken on therole of an FSA-regulated fund manager.

This particular fund is a University Challenge SeedFund, which provides start-up funding for spin-outcompanies from Kings College London and QueenMary, University of London. Taking on the fundmanagement role will deepen our experience ofthe early-stage investment sector, and build closerties with the two colleges.

Shifting Sands

In September 2008, we published Shifting Sands,a detailed report on the changing nature of the UKsearly-stage venture capital market. Venture capitalis absolutely vital for small start-ups, but evenbefore the onset of the credit crunch the supplyof private sector funding for riskier early-stageinvestments was already getting tighter. As a resultthe public sector is becoming much more important,and a prolonged recession will only intensify the

pressure on government to fill the gap left by theVCs, while demonstrating that the public moneyit invests is being spent wisely and will generatea suitable return for the economy as a whole.

At the same time, those private sector investorswho do remain in the market are more often thannot individuals, rather than funds. There are wholenew categories of business angel, from megaangels who can invest large sums in their ownright, to cohorts of angels who invest as groupsor syndicates. Some of these investors will alsoteam up with the public sector on particular

opportunities, and this partnership model israpidly becoming the standard model.


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Growing social finance investmentin social enterprises means we canunlock the right resources for some ofthe UKs most exciting and ambitiousbusinesses, and help them to do goodand do well.Sarah McGeehan, NESTA

Social enterprises are a new model for 21stcentury business, combining the social andenvironmental goals of a charity with theprocesses you would find in a profit-makingfirm. There are now more than 55,000organisations like this in the UK, contributing8.4 billion to the UK economy every year.Sarah McGeehan heads up social finance forNESTA, helping to encourage the growthof more successful social enterprises like theHoxton Apprentice, a flourishing restaurantand bar in North London.


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Are the conventionalboundaries betweenpublic, private andvoluntary still relevant?

Less so, and NESTAswork on socialinvestment shows why.


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Social investment

Social enterprises like Cafdirect and Jamie Olivers Fifteenrestaurant group are a new model for 21st century business,

combining the social and environmental goals of a charitywith the processes you find in a successful profit-making firm.There are now more than 55,000 organisations like this inthe UK, and together they turn over 27 billion and contribute8.4 billion to the UK economy every year.

Social enterprises can play a key role in tackling some of the socialchallenges we are all now facing. But our research has shown thatfunding is a significant barrier. The sort of private equity investmentthat helps to start up and expand profit-making enterprises is harder tocome by for those with social or environmental objectives. Structuringcapital investment for this sort of business is challenging and thesupply of funds far more limited. Yet without such capital investmentthe emerging social enterprise sector may lack the resources to seizenew opportunities, or even fail in fundamental ways. We believe thisis the time to transform investment in the social enterprise sector, andthat NESTA is uniquely placed to help this happen.

Over the next three years we will work with a wide range of partnersto develop and test new approaches to stimulate the demand for,and supply of, social enterprise capital. Our ambition is to act asa market-maker to help the social finance sector mature and grow.Our three-year programme will address the barriers currentlyrestricting the development of risk capital, and explore how thesecan best be overcome.

Bridges Social Entrepreneurs Fund

A good example of the work already happeningin this area is the Bridges Social EntrepreneursFund, which we invested in and helped launchin November 2008. Bridges Ventures is a fundmanagement company that aims to achieve socialor environmental aims while generating attractivereturns for investors. The fund will be dedicatedto social enterprises, and has already raised4.25 million from a number of investors, including

NESTA. Each enterprise will receive up to 1 millionin equity capital, and priority will be given toventures that can deliver a high social impact aswell as solid financial performance.

Over time, the fund hopes to attract moreinvestment into the social enterprise sector bydemonstrating the real social and economic valueof investments like these. Support for new socialenterprises, to help them prepare for funding,is another important part of the scheme.


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Working with NESTA has been greatfor us here at the Farm. They haveprovided the support, encouragementand structure that we needed and,most importantly, when we needed it.They seem to understand how towork with small and big organisations,

which is no mean feat.Bronwen Wilson, Hackney City Farm

The Hackney City Farm is one of the finalistsin the Big Green Challenge. Their entry isall about encouraging people to reduce theircarbon footprint, and is based around theidea of 60 Steps to a 60% reduction. Leadvolunteer Bronwen Wilson is helping torecruit 15 Green Ambassadors from the localneighbourhood who will use the 60 practicalsteps the farm team has developed in their

own community projects. The farm is aimingto reduce its own carbon footprint by 30%in 2009.


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How do we know if anyof this work is actuallymaking a differenceto the UKs economic

performance?We are working onhow to measure

innovation accuratelyat the national level.


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Measuring innovation

NESTA has argued for several years that much innovationis hidden it does not show up in official statistics about

scientific R&D. That is partly because not all technicalinnovation shows up in the official statistics. But it is alsobecause not all innovation is technical.

Change and improvement are more often about new business models,new distribution channels or new products than about new technology.This is particularly important in a service economy like the UK.

This is not a new idea academics have looked at innovation in thisway for many years now. But it is new to government. And 2008was the year in which this way of thinking became mainstream ingovernment. In March 2008 the Government published its InnovationWhite Paper, Innovation Nation, which was firmly based on this new,broader view. We see this as a significant achievement, reflectingthe way in which we worked very closely with the new Departmentfor Innovation, Universities and Skills on the White Paper.

It brought with it a new challenge for NESTA. One of the reasonsthat government historically focused on innovation as technologicalchange is because a set of annual figures exists that measurestechnological change: namely, spending on R&D. There is currentlyno way of measuring the wider concept of innovation in a consistent,coherent way at the national level. So in the White Paper theGovernment asked NESTA to develop a new Innovation Index whichwould capture innovation in the UKs increasingly important servicessectors, creative industries and in the delivery of public services.

The Index will be ready in its final form in 2010, with a pilot versionin 2009. In 2008, we successfully completed a preliminary phaseof mini-projects to establish a credible design for the overallshape of the Index. The key elements will be as follows: A macro-economic measure: showing the level of investment

in innovation as a component of GDP and its contributionto productivity growth.

A measure of innovation at the level of the firm: indicatorsof innovation activity for key sectors of the UK economy(software, energy, construction and so on).

A measure of the wider conditions that enable innovation,such as skill levels, educational effectiveness and so on.

A framework for quantifying user-led innovation, whichis frequently neglected. A dedicated workstream for measuring innovation in the

public sector, an area where data are particularly poor butwhere innovation is nonetheless essential.

Innovation Index

NESTA will develop a new Innovation Index tomeasure the UKs performance as an InnovationNation a pilot index will be published in 2009with a fuller system in place by 2010.

Innovation Nation, March 2008


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Our work on hidden innovationhas successfully made the case withpolicymakers that the current tools formeasuring the UKs performance needto be brought into line with the reality ofinnovation in our economy and society.The next stage is to develop measures fit

for the 21st century something we arepioneering with our Innovation Index.Dr Mike Harris, NESTA

NESTA is working to increase the quality andquantity of research on innovation, which we dothrough our own research and by commissioningleading academic and policy institutes. We useour knowledge and our unique position in theUK policy environment to develop and promotea strong pro-innovation policy agenda acrossthe UK. We are also building a national network

of leading thinkers on innovation, based oncollaboration and forming connections betweencentres of excellence.


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Should the UKbe trying to createits own versionsof Silicon Valley?

Our work is showinghow every regionneeds its own approach

to innovation, ratherthan following astandard route.


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Place

Innovation does not happen in a vacuum. It happens inparticular places, with particular political, economic and social

characteristics. In 2008 we tried to find out more about whydifferent places perform so differently when it comes to thegeneration and exploitation of new ideas.

Part of the answer is that history matters enormously. The twocontrasting cases of Swansea and Cambridge illustrate the point.Swansea was a major player in the production of coal, iron, copper,tin and zinc up to the 1970s. When many of these heavy industriesclosed in the 1970s, multinational companies were attracted by thepool of low-skilled low-wage labour released by de-industrialisation.They identified South Wales as a location for their assembly branchplants. This seemed initially successful. At the height of production,50 per cent of televisions and 75 per cent of video cassette recorders(VCRs) produced in Europe were made in Wales. But by the 1990s,these footloose industries, which required a labour force with fewspecific high-level skills, began to seek out more cost-effective

locations elsewhere. So this second phase of development ended,leaving Swansea de-industrialised again.

Over a similar period, from the 1970s to today, Cambridge wentfrom being a modest service-based market town to being theUKs most innovative city, with a high-tech cluster of some 900innovative firms. While there are issues for it to tackle, it remainsin a strong economic position.

Both cities ability to innovate was strongly influenced by theirhistory. Swansea struggled to escape its industrial past to finda role in the new information economy. It was precisely the lackof such a traditional industrial past that helped Cambridge

to succeed.

The link between new ideas and economic growth in a region is alsonot simple. Other research we carried out showed that whether aregion can absorb and spread knowledge from other places is at leastas important in generating local economic growth as the ability togenerate new ideas itself. Local businesses should not try to build linkswith their local university just because it is local. If the skills and ideasthey need are to be found in other regions or even other countries,then they should be encouraged to make those links. It is a mistaketo have a standard view of what regions should try to do to becomemore innovative.

Absorptive capacity

In October 2008 we published our reportInnovation by Adoption, which shows that thedifferent aspects of innovation can quite happilyco-exist in different local or regional centres in fact, places that are good at generating ideas(like university towns) are not always the best

at commercialising them, and might do betterto team up with another city or region for thatphase of the process.

Likewise, those who come to live and work inUK bring with them a whole range of differentperspectives that can re-invigorate our ownthinking. If the UK is to fulfil its full potentialit will need to become more open to these newideas, and get much better at exploiting them.


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Board of Trustees

01 Sir Chris PowellSir Chris Powell is NESTAs Chair. In the public sphere, his experience

includes chairing the Institute of Public Policy Research think tank;The British Councils Creative Industries Advisory Panel; EalingHammersmith and Hounslow Health Authority; and Vice Chair of thePublic Diplomacy Board. He serves on the Governments ScienceForum and the Board of Riverside Studios. In the commercial world,Chriss experience includes non-executive directorships at UBM,Dr Foster, and Renew. He is a member of the Advisory Panel at PWC.

02 Sir Michael BarberSir Michael Barber joined McKinsey in September 2005 as the expertpartner in its Global Public Sector Practice. In this capacity, he hasbeen working on major transformations of public services, especiallyeducation, in the USA, UK and other countries.

03 Professor Marc ClementProfessor Marc Clement is a prize-winning theoretical physicsgraduate with a PhD in Laser Plasma Interactions from theUniversity of Wales, Swansea and the Rutherford Laboratoryat Oxford. He is Chair of Innovation and Senior Executive,Vice-Chancellors Office at the University of Wales, Swansea.

04 Dr Stuart Cosgrove(retired in October 2008)Dr Stuart Cosgrove is Channel 4s Director of Nations and Regions.Since joining Channel 4 in 1994, the broadcaster has won numerousinternational awards for dramas, documentaries and entertainment

shows that Stuart commissioned.

05 Sherry CoutuSherry Coutu is an experienced businesswoman and entrepreneur.She was founder, CEO and Chairman of Interactive InvestorInternational plc, a software company serving the financial servicesindustry, and is a non-executive Director at Cambridge UniversityPress (Finance Board) and New Energy Finance Limited.

06 Stephen EmmottStephen Emmott is Director of Computational Science at Microsoft,where he leads a multi-disciplinary, international team of scientistsfocused on pioneering new kinds of science and computing

to accelerate fundamental advances in key areas of science ofsocietal importance.

07 Professor Kathy SykesProfessor Kathy Sykes is Professor of Sciences and Society at BristolUniversity. She has a background in science communication andhas helped to create, among other things, a new Festival of Sciencein Cheltenham, and Famelab.

The Board

01 02

03 04

05 06

07 08

09 10

11 12

13 14

15


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08 Andrew FlanaganAndrew Flanagan is currently Chairman of Fleming Media, a privatelyheld media investment company. From 1996 until 2006, he wasChief Executive of SMG plc, one of the UKs leading media companies.

Earlier in his career, Andrew held a number of senior financial rolesin the telecoms and IT sectors.

09 Jitesh GadhiaJitesh Gadhia is Managing Director and Global Head of Advisory atBarclays Capital, and was previously Managing Director of ABN AMROCorporate Finance. Jitesh is also a Trustee of Guys and St ThomasCharity, the UKs largest National Health Service endowment.

10 Professor Julia Goodfellow CBEProfessor Julia Goodfellow is Vice-Chancellor at the Universityof Kent. Previously, she was Chief Executive of the Biotechnologyand Biological Sciences Research Council (BBSRC).

11Dr Tracy LongDr Tracy Long is the founder of Boardroom Review, a specialisedconsultancy that advises boards of directors and trustees on theirboard performance and effectiveness.

12 Patrick McKennaPatrick McKenna is Chief Executive of Ingenious Media plc, oneof the UKs leading media investment and advisory companies.Prior to forming Ingenious in 1998, Patrick was Chairman and ChiefExecutive of The Really Useful Group. Before that, he was a Partnerin Deloitte & Touche, where he ran the media group.

13 Nick StarrNick Starr is Executive Director of the National Theatre (NT)of Great Britain, appointed in 2002 to run the NT alongsideNicholas Hytner. He is also Chair of Battersea Arts Centre (BAC).

14 Liam BlackLiam Black has developed and run a number of social businessesand is one of Prime Minister Gordon Browns first Social EnterpriseAmbassadors. He recently helped to expand Jamie Olivers Fifteenrestaurant into a global brand. His latest venture is Wavelength,which brings together some of the best private sector companieswith social entrepreneurs.

15 Professor William Morris(retired in January 2008)Professor William Morris graduated from the Queens Universityof Belfast with a degree in electrical engineering and spent thefollowing 21years in a wide variety of posts with Short Brothers(now Bombardier) aerospace company in Belfast.

Finance and Audit Committee

Andrew FlanaganChairmanJitesh GadhiaManaging Director and Global Head of Advisory

at Barclays CapitalDr Tracy LongFounder of Boardroom ReviewTony ThomasFormer Partner, PricewaterhouseCoopers

Endowment Committee

Jitesh GadhiaChairmanMikael Breuer-WeilNon-executive Director at RIT CapitalSherry CoutuNon-executive Director at Cambridge UniversityPress and New Energy Finance LtdPatrick McKennaFounder and Chief Executive of Ingenious Media plcNick Cavalla

CIO of the University of Cambridge

Innovation Programmes Committee

Sir Michael BarberChairmanMadeleine AtkinsVice-Chancellor, Coventry UniversityProfessor David AucklandHead of the Electrical Engineering Department,Manchester UniversityTom HadfieldPatron of the National Youth AgencyBettany HughesHistorian and broadcasterPaul RobertsDirector of Strategy, Improvement and DevelopmentAgency for Local Government

William RoeChairman of Highlands & Islands EnterpriseNick StarrExecutive Director of the National Theatreof Great BritainProfessor Kathy SykesProfessor of Sciences and Society at Bristol University

Investment Committee

Sir Chris PowellChairmanAdrian BeecroftPartner and former Chief Investment Officer at ApaxProfessor Marc ClementSenior Executive, Vice-Chancellors Office,University of Wales, SwanseaSherry CoutuNon-executive Director at Cambridge UniversityPress and New Energy Finance LtdIan McIsaacFormer Senior Partner of DeloittesErnie RichardsonCEO and Managing Partner at MTI


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January

Published Transformers: How local areas innovate

to address social needs, whichconsidered why some places are moreeffective at meeting changing socialneeds than others. [03,17]

Beyond the Creative Industries,to help improve public understandingof the true extent of creative activityin the UK economy.

The Difference Dividend, one of ourProvocations series, which argued

that immigration is vital to innovation.

Launched The Big Green Challenge, a 1 million

prize fund to encourage people towork together to tackle climate change,chaired by Lord Puttnam. [01,02]

Design London, which brings togetherdesign, engineering, technologyand business expertise to addressfuture innovation challenges.

February

Published Creating Innovation, which examined

whether the creative industries supportinnovation in the wider economy.

Preparing for the Future, a collectionof essays on equipping young peoplefor a rapidly changing world.

Supported One of the 2008 Social Innovation

Camps, which bring a wide rangeof people together to use newtechnology to tackle social needs.

Hosted The International Thought-leaders

Summit, a one-day event with leadingcreative industry experts, discussingpolicies for these industries in the21st century.

The book launch for InventingEntrepreneurs and The Managementof Technological Innovation.

Celebrated An Oscar for the animated film

Peter and the Wolf, won by HughWelchman, a NESTA grant recipient.

March

Launched The Future World of Work, as part

of a wider project examining thebest ways to prepare young peoplefor economic and social change.

Open Alchemy in partnership withOracle, which is using open innovationto develop new products with theirsuppliers. [04, 05, 06]

Celebrated The publication of the DIUS White

Paper, Innovation Nation, whichgives us a critical role in stimulatinginnovation in the UK, and leadsto the establishment of The Lab, theInnovation Index, and the InnovationResearch Centre.

Becoming one of Channel 4s fourstrategic partners in its Next on 4vision for the future.

April

Hosted David Cameron, Leader of the

Opposition, who outlined his threecore principles of innovation in thePost-Bureaucratic Age. [21]

Announced The 100 ideas short-listed for the

Big Green Challenge.

Invested In the UMIP Premier Fund, which

supports businesses emerging

from the University of Manchester,and which could eventually investup to 50 million.

As part of a 1.25 million fundingin drug development companyHaemostatix.

Awarded Prizes to the winners of Planet SciCast

2008, a competition for the best shortfilms about science experiments, whichreceived over 70 entries this year.

Celebrated A Female Innovator of the Year

award for Tanya Ewing, oneof our Starter for 6 entrepreneursin Scotland. [08]

Our year

01[January]

02 [January]

03 [January] 06 [March]

05 [March]

08 [April]

07 [May]

09 [May]

04 [March]


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May

Hosted The Innovation Edge conference

at the Royal Festival Hall, which wasattended by 3,000 people, and hadkeynote speeches from Gordon Brownand Bob Geldof.[07, 09,10,11,12,14,18,20]

Published Total Innovation, the third in a series

of reports on hidden innovation,which focused on high-tech sectorssuch as aerospace and pharmaceuticals.

Taking Services Seriously, whichexamined how UK services firmscan become more innovative andmore productive.

Breaking the Boundaries, one of ourProvocations series, which arguedthat using innovation to achieveenvironmental sustainability must bean overarching goal of national policy.

Launched The Web Science Research Initiative

on the future of the internet, withSir Tim Berners-Lee. [13]

June

Hosted The London EASY summit, focusing

on the importance of creating a policyframework that can help stimulatecross-border investment in early-stagebusinesses.

Published Selling Sustainability, which

examined how to motivate individualsto play their own part in tacklingclimate change.

Awarded 29 grants worth up to 10,000

to the participants in Starter for 6,our programme for up-and-comingentrepreneurs in Scotland.

Launched The Raise the Game project, to

help drive growth in the UKs videogames industry.

July

Launched Consultation on the new Innovation

Index, which will measure the UKscapacity for innovation.

Hosted A policy breakfast on The Future

of Europes Research and InnovationSystem with Ian Pearson andJohn Denham. [22]

Published New Inventors, which demonstrated

how user participation is changingthe rules of conventional innovation.

Hidden Innovation in the CreativeIndustries, which compared howinnovation works in four crucialcreative sectors.

History Matters, which examinedwhether history does indeed matterin the development of innovativecities and regions.

Invested 500,000 in the GP Bullhound Sidecar

Fund, which focuses on technology,media, and telecoms businesses.

As part of a 1.1 million funding roundfor Gnodal, to help develop its data-

centre technology.Named The 12 UK film businesses who

will take part in our Take 12 DigitalInnovation in Film programme. [16]

August

Sponsored The UK Young Screen Entrepreneur

Award, which will enable youngmovie-makers to learn more aboutthe international film business, andwin a behind-the-scenes tour of theIndian screen industry.

Invested in The IP Venture Fund, which invests

30 million in spin-out companiesat IP Group partner universities.

Celebrated Becoming the first UK organisation

to benefit from the Young InnovativeEnterprise legislation, which will allowus to invest up to 150 million in total,and up to 11 million per company.

10 [May]

14 [May]

15 [December]

16 [July]

17 [January]

11[May]

12 [May]

13 [May]


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tember

edvents and debates at the UK politicalrty conferences, including sessions

n the UKs economic competitiveness,vestment in early-stage businesses,d the video games industry.

sted3 million in the Pentech Venturesnd, which backs enterprise andecommunications software

usinesses.

ishedhifting Sands, which examinede changing nature of the UKsrly-stage venture capital market.

nnovation in Services, a seriesreports on innovation in five UKrvice sectors.he Art of Innovation, and Fine Artsaduates and Innovation, two studies

n the contribution that fine arts

aduates make to innovation in theeative industries.eveloping Entrepreneurial Graduates,part of an ongoing process to

entify best practice in this area, boththe UK and overseas.

October

Published Innovation by Adoption, which

demonstrated the importance of newexternal ideas in the developmentof innovative cities and regions.

UK Global Innovation, which explored

how innovation works in key emergingmarkets, and what lessons there mightbe for the UK.

Launched The Creative Business Catalyst pilot

programme, to bring togetherbusiness school students and creativebusinesses.

Announced The ten finalists for the Big Green

Challenge, which encouragespeople to work together to tackleclimate change.

Celebrated

Procter & Gamble taking on threeof the products pitched to themas part of our Corporate OpenInnovation Challenge.

November

Launched The Bridges Social Entrepreneurs

Fund, which will invest in new socialenterprises. [23]

The Open Ventures Challenge,to help Cancer Research UK find

new ideas to fund their research.

Hosted Innovation Live, in partnership

with the NHS, where more than 500NHS professionals explored waysto transform healthcare in the UK.

The Rip, Mix and Burn event, toencourage archive owners to promoteinnovation by digitising their IP.

Took on Our first fund management role, with

the Kinetique Biomedical Seed Fund.

Published The Failure of Market Failure, one of

our Provocations series, which arguedfor a 21st century Keynesianism.

December

Hosted An event on the economic downturn,

chaired by Lord Drayson, Minister ofState for Science and Innovation. [19]

Published

Attacking the Recession, which arguedthat the UK must use the short-termeconomic crisis to address longer-termchallenges.

Raise the Game, a study of thecompetitiveness of the UKs gamesindustry.

The UK Fashion Designer Economy,which aimed to provide a betterunderstanding of the complex UKfashion industry.

Launched The Carbon Crucible initiative, bringing

researchers from different disciplinestogether to help reduce the carbonfootprint of the energy industry.

[15, 24,25] V-JAM, an open innovation project

with Virgin Atlantic.

Announced Francis Carpenter, former CEO of the

European Investment Fund, joiningNESTA Investments as a Senior Advisor.

The new 5 million Innovation

ay]

ecember]

20 [May] 25 [December]

21[April]

22 [July]

23 [November]

24 [December]


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NESTA is producingresults practicalinsights aboutinnovation that

benefit the UK.


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www.nesta.org.uk

Documents

NESTA Annual Review February 09