November 16, 2017

A visitor to IP Group’s smart offices near Cannon Street is greeted by a wall of curiosities. His eye will likely be drawn first to an object of quite startling blackness. When he looks more closely it will seem as if the object is playing tricks on the eye. This is Vantablack, which is said to be the darkest man-made substance in existence, absorbing 99.96 per cent of the light that hits its surface and making 3D objects appear 2D. It was developed by Surrey NanoSystems three years ago. In 2018, the British architect Asif Khan will unveil a building made of the substance at the Winter Olympics in South Korea. It will, he says, ‘be like you’re looking into the depths of space itself.’1

Then there is what from a distance looks like a harmonica. This is a MinION, a bite-sized DNA tester developed by Oxford Nanopore, which can read DNA codes in minutes and costs a revolutionary $1,000. It has been used to track the ebola virus across West Africa, and to research zika in South America. The company believes that the device will soon be used by people in their own homes and transform the way we monitor our health.

A washing machine made of Lego uses polymer beads to remove stains from clothes with small volumes of water

There is, oddly, a washing machine made of Lego. This represents the environmentally friendly work of Professor Stephen Burkinshaw of the University of Leeds. He was investigating how to help dyes stay on fabrics for longer and ended up solving the opposite problem. He found that polymer beads could be used to remove stains from clothes with small volumes of water. He called his company Xeros, which is the Greek word for dry.

All these are the consequence of good ideas meeting good capitalism. It is unlikely any of the companies would be in their current successful position were it not for the involvement of IP Group. It invests in early-stage innovations, mainly emerging from universities, with the aim of building them from a boffin’s Eureka! moment into a successful and, sometimes, world-changing business. As well as cash, it provides advice and practical help. With Xeros, IP drew up an initial business plan and provided interim management, including the CFO. It assisted on strategy and helped find new investors, a CEO and chairman.


IP is one of the UK’s leading players in the ‘patient capital’ sphere, where investors forego immediate returns in favour of more substantial earnings further down the line. It allows small companies to make decisions based on long-term strategy, scale up over time, and harnesses founders, staff and investors to the same ends. It is a sector that is not only good for professors with smart ideas but little business sense, but also for the badly tarnished reputation of capitalism itself. IP and companies like it are in for the long term – for example, IP has been involved with Oxford Nanopore for 12 years and has never taken a penny out. Its reward is a stake now worth something like a quarter of a billion pounds. Jacqueline Novogratz of the non-profit global venture fund Acumen describes patient capital as taking “the best of the markets as well as philanthropy and aid. Patient capital is money invested in entrepreneurs building companies and organisations that solve tough problems like healthcare, water, housing, alternative energy”.

Patient capital is a sector that is not only good for professors with smart ideas but little business sense, but also for the badly tarnished reputation of capitalism itself

Philip Hammond is well aware of the sector’s importance to the shape of the British economy and its future competitiveness. In his Budget next week the Chancellor is expected to publish the results of the Patient Capital Review, which he set up at the start of the year, chaired by Damon Buffini, former head of the private equity company Permira. The Review has examined the state-backed venture capital schemes known as the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS), which give tax relief of between 30 and 50 per cent to those who invest in small, unlisted (and therefore riskier) companies. The Government felt some investors were choosing the least risky option and in effect using the schemes to cut their tax bills. The Budget seems likely to attempt to close off some of those loopholes.

Patient capital is one of the rare spaces where the Brits have leapt ahead of the Yanks, by getting involved in start-ups and spin-outs at an earlier stage of development. But possibly not for long.

Eric Ries, a San Franciscan entrepreneur, is attempting to start a long-term stock exchange, LTSE, and has secured the support of a number of successful venture capitalists. The aim would be to prevent small companies from being exploited by founders and investors in search of a fast buck. It proposes that the longer investors hold shares, the more voting power they would have, and remuneration schemes that actually force executives to focus on the long game by, say, having to hold stock for 10 years, even if they leave. Not even the City’s chief defenders can argue that the lack of genuine long-term incentives for executives has been properly addressed.

Philip Hammond is well aware of patient capital’s importance to the shape of the British economy and its future competitiveness

A shift towards a more respectable – and respectful – model of capitalism is long overdue and has only become more urgent in the past decade as public confidence in the business and financial worlds has fallen away. Stories like IP Group’s and innovations like the LTSE can help shift the public narrative away from one of a rapacious, untameable culture of greed and self-interest towards something more like Adam Smith’s original vision:

“Concern for our own happiness recommends to us the virtue of prudence, concern for that of other people, the virtues of justice and beneficence – of which the one restrains us from hurting, the other prompts (us) to promote that happiness.”

Patience, as the saying goes, is a virtue.