Towards the end of the 19th century, when Liverpool was ‘the second port of the British Empire’ and one of the UK’s main routes to the world, the Liverpool School of Tropical Medicine (LSTM) was set up by the merchants of the city to help their businesses and their trade, explains Professor Janet Hemingway CBE, the school’s former director.

Hemingway is the founding director of iiCON, the Infection Innovation Consortium, which brings together the Liverpool City Region’s academic, industry and clinical partners to invest in the discovery and supply of anti-infectives, in a modern update of the LSTM’s founding mission.

“The link with commercial businesses has continued,” Hemingway says. “Before, it was a case of coming across tropical diseases while trading overseas and saying: ‘Please help us understand them.’ Now, it’s more about looking at companies that are producing different products to prevent or treat infectious diseases and helping those companies to grow.” 

Because of COVID-19, businesses in the sector are having fewer problems with proof of concept. Products Hemingway has been involved in – drugs, vaccines and diagnostics, air scrubbers and sewage treatments – have sold 3.5 billion units over the past 18 months alone, and have attracted funding from Innovate UK, the Bill & Melinda Gates Foundation and commercial investors. 

“There are good news stories coming through, with many of the local companies we’re working with already starting to take people on and creating jobs in this area,” says Hemingway. 

“We work with local businesses at all stages of the pipeline, from early-stage development onwards, who want to know how they get a product over the line. We must be doing something right because companies keep coming back to us.” 

An £18.6m government grant that was slated to leverage £120m over five years has in fact leveraged £200m over 18 months. This figure is testament to the Liverpool City Region’s strengths in the medtech and life sciences sector. 

Joined-up thinking 

Plugging into that network, newly launched LYVA Labs is looking to fill an early-stage investment gap for the city region’s entrepreneurs, “to get them to a point where others will be interested to invest”, says founding CEO Lorna Green. 

“We are more a city-region economic growth organisation than an equity fund,” Green explains, although the group will take equity in the 25 start-ups it expects to support over the next five years. With money from the metro mayor’s strategic investment fund, LYVA Labs “has been led by us and co-created with Liverpool City Region’s investment team”, she says. 

“We’ve had lots of support to establish this and many institutions and businesses wanting to engage,” she adds.  

“Everybody thinks it’s very much needed. Of course, everybody says they want to work together, but they often don’t actually have the resources to enable them to. LYVA Labs will be able to work across the different institutions and business communities and facilitate that collaboration.” 

Green, who has lots of experience in the NHS, is particularly interested in finding entrepreneurs who could be “frontline staff in the health service or care sector, academics in our universities or business entrepreneurs”. 

Steve Stuart, chair of the professional and business services advisory board for Liverpool City Region local enterprise partnership (and also an ICAEW and Corporate Finance Faculty member), has spent most of his working life as an adviser to the city’s SMEs. He sees LYVA Labs “sitting at the heart of the city’s rapidly improving regional innovation ecosystem”. 

“We’ve launched with £5m, but part of our brief is to raise further capital and demonstrate there’s a strong pipeline of opportunity within Liverpool City Region, where people want to give us more money to carry on the good work that we’ve started,” he says.  

“Part of this will be bringing things together so there’s a funding runway for these technology and innovative businesses to get all the way to Series A. That’s been one of the blockers in the local early-stage portfolio.” 

Stuart points to the region’s four universities (the University of Liverpool, Liverpool John Moores University, Liverpool Hope University and Edge Hill University), which “one would think were ideally placed for knowledge-based businesses of the future”, but which have low spin-out rates. 

“In some ways, there was a healthier environment for joint venture innovation 20 years ago,” he argues, aiming to prove once again that “Liverpool is a fertile piece of real estate that should be capable of growing a lot more innovative businesses”. 

Among the questions he believes need addressing are: “What strengths have we got in health and life sciences? What strengths do we have in logistics? What role will the freeport play? Is there enough finance there? Are we using the local universities properly to actually train the people to work in these innovative businesses? Are we forging those employer links so that the skills of tomorrow are being provided today?” 

Some of these questions are also being asked nationwide, but the region has, in recent history, suffered from an absence of investors seeing businesses develop from seed stage onwards. 

The potential is huge. On 26 April, Steve Rotheram, Liverpool City Region’s metro mayor, published an Innovation Prospectus to outline its successes and ambition.  

Hemingway says: “We need to let people know what’s going on here. Lack of investors on the ground in Liverpool only matters if people in London and Manchester are not hearing about what we’re doing. The message is getting out now. We need to make sure that follow-on growth funding is there for the companies when they are ready to take that next step. They need to have access to the capital to be able to do that, the facilities to be able to do that and to stay as part of the ecosystem that we’re trying to create.” 

Better connections 

The corporate finance community has served Liverpool “indifferently”, according to Stuart. 

“What I mean by that is that with some of the local businesses there are strong relationships with private equity, but among others there’s still an undercurrent of mistrust. And yet, in the past five to 10 years, private equity has enjoyed a number of big successes in Liverpool – well, more than it has done in the previous 20 years. There continues to be a number of significant deals getting done.” 

Stuart points to “a couple of family offices” and a new private equity player in town, Arete Capital Partners, set up in December 2020 by Mike Fletcher, Simon Lord, Ben Hatton, Matt Cheetham and David Moore. It has raised £136m and put close to £100m to work in its first 12 months.  

In setting up Arete with his co-founders, Fletcher – Liverpool born and raised – brought his extensive investment banking and investment track record expertise back to his home city “because we wanted to do something based in Liverpool, with headquarters in Liverpool”, he explains. 

Their funding is “not myopic” about where it invests, he says, and is on the lookout for opportunities in the North West and beyond, but also wants to be a lot more proactive in Merseyside. 

Arete gets its capital from an exclusive network of family offices and high-net-worth individuals.  

“We have a range of investors from different backgrounds. Many of them have been highly successful entrepreneurs themselves or are still running great companies.”  

This brings a built-in advice and support network for portfolio companies, which gain investments ranging from £1m to £15m, with Arete looking to make 10 to 12 deals per year. 

The company aims to drive wider benefits to the city region’s investment community. “What we hope to do with Arete with our physical presence is instil confidence that capital is here and that businesses can be funded from here,” says Fletcher. 

Arete uses a network of local lawyers and advisers to undertake financial, legal and commercial diligence on deals. It has co-invested with another local firm, William Currie Group.  

Fletcher adds: “It’s about making sure we identify the opportunities and that the confidence is there to know Liverpool-based businesses can raise the money – not just through government funding. There’s private capital for businesses that want to hit it out of the park.” 

“The room is beginning to be populated by serious players,” concludes Stuart optimistically. “If we get the collaboration right and the follow-on right, then we can all enjoy the success of helping new businesses fly.” 

Fresh air 

CageCapture is a Liverpool-based start-up that specialises in advanced chemical materials, with products set to tackle leaks of dangerous or environmentally harmful chemicals.  
Dr Vikki Berryman, chief business officer and head of R&D, explains that the company is aiming to “revolutionise air filtration” by selectively targeting and removing chemical components from the air. It’s also targeting niche markets for isotope separation and greenhouse gas capture, where there are, she says, “not a whole lot of solutions”. 

It’s exactly the sort of knowledge-enabled green innovation that investors are clamouring for – and it’s one of Liverpool’s own. Two grants totalling £359,000 from Innovate UK helped the company prove its scalability. Now it needs patient capital to get through the testing and development stages that will lead it to market. 

“We’ve had multiple offers for funding,” Berryman says, “and a lot of interest from people who are focused on the green impacts of their investments. But it’s something that needs to be weighed up – whether we take investment to fund a project.” 

Most of the scientists on the team are academics and graduates of the University of Liverpool. Berryman, a Canadian who was previously based in Manchester, has found Liverpool to be a fruitful environment. “We’ve reached out to find help in marketing and to people in finance, and there’s a great innovation ecosystem here,” she says. 

“Sometimes, you feel very isolated working in a start-up on your own technology. And then, the idea of having to go and find investment or find the grant money is a big job. Anything that reduces the barriers to funding and finding the expertise is critical.  

“There are a lot of support systems out there – it’s just knowing how to access them. That’s something we’re learning. If we’d known all of this three years ago, we would’ve had an easier path. But the barriers to knowing where to look and who to talk to can be broken down.” 

Liverpool City Region Innovation Investment Summit – 25 May 

The Liverpool City Region LEP (Steve Stuart), ICAEW’s North West region (Alex Pilkington), the Corporate Finance Faculty (Shaun Beaney) and the Growth Platform (Danielle Carrington) have come together to organise the first LCR Innovation Investment Summit, at The Spine on 25 May. The event will involve leading international, national and regional experts, including the British Business Bank, LSTM, Innovate UK, Unilever, Sci-Tech Daresbury, Arete Capital Partners, Barclays Eagle Labs, LCR Ventures, Edge Hill University, CageCapture, Inovus Medical and ICAEW. Steve Rotherham, metro mayor of the Liverpool City Region, will open the conference. 

To reserve complimentary places, please register at tinyurl.com/CF-LCRSummit