Quantum computing and shopping centres...
Off to Lunch in Oxford part two...
Welcome to part two of our look at Oxford Science Enterprises and university spin-outs. For part one, an interview with chief executive Alexis Dormandy, click here.
“The question we ask ourselves is: ‘We think we are best in the world - are we really?” Alexis Zervoglos is talking about quantum computing and the businesses that Oxford Science Enterprises (OSE) has backed in the sector. Zervoglos, not to be confused with Alexis Dormandy, the chief executive of OSE, is senior partner for tech at OSE. In this role he oversees OSE’s investments in health tech, deep tech, software and AI. This means he looks after some of the most exciting start-ups in the UK. These businesses include First Light Fusion, one of the pioneers of fusion energy, as well as quantum computing businesses Oxford Quantum Circuits, PQShield and Orca Computing, which recently sold a computer to the Ministry of Defence.
His question about quantum computing is important because so much of the work in quantum computing is shrouded in secrecy, particularly in China, but also in the US. Zervoglos, though, is confident that despite these two superpowers pumping significant investment into quantum, the UK is doing well. “On quantum, we are bloody good at it,” he says.
Quantum computers are, in short, supercomputers. I don’t want to go into detail here about what quantum computers are or the technology behind it because frankly I am not smart enough to explain it in simple terms. Smarter people than me have explained that they are exponentially faster than traditional computers and capable of doing far more complex tasks because rather than seeing the world in bits – 0 and 1s – they see it in quantum bits, or qubits. This useful Q&A on the topic by IBM identifies some of the complex tasks that quantum computing could help with, such as modelling the behaviour of atoms in a molecule or plotting the routes of tankers in the global shipping network.
There are multiple challenges to making quantum computers useful. Scientists and engineers are not only working on the speed of the technology but trying to reduce errors and extend the lifetime of the computers. OSE’s investments cover a range of quantum technologies. PQShield is working on protecting online transactions and communications from threats posed by people using quantum computers for ill-means. Oxford Quantum Circuits has developed the only quantum computer commercially available in the UK for businesses to use. “They are all world leading companies,” says Zervoglos.
Despite his optimism, Zervoglos plays down expectations that Britain’s work in quantum computing could help to create some sort of new Silicon Valley. The original Silicon Valley, as the name suggests, was built on California’s work in chips and hardware before software and social media came along. “It will open doors but I wouldn’t think of it as a defining economic objective,” he says. Part of the reason, for this, he adds, is that anyone can now start a business “with a credit card and a laptop”. This means that being a quantum computing hub, if that is what the UK becomes, does not necessarily generate many more businesses in the surrounding area.
Zervoglos is ideally placed to comment on the state of the UK start-up and tech scene. His own career started in 1997 when he spun a business out of the University of Oxford called Opsys, which developed OLED display technology now used in televisions, the Apple Watch and other devices. He joined OSE early in 2021. “It’s night and day,” Zervoglos says of the UK compared to when he set up his business. “There is an ecosystem. Everything has changed. Innovation feeds off momentum and that momentum is here at the moment. It’s an incredibly exciting time to be here.” Interestingly, Zervoglos is keen to emphasise the importance of the non-tech businesses in Oxford and the “captains of industry” living in the area, some of whom are retired and some of whom are still working, who can help start-ups. “There is a lot of wisdom and they are willing to share it,” he says. “Oxford is not just the university.”
For all the optimism around Oxford and the UK start-up scene, however, there are challenges. Some of these are around the practicalities of investing in university start-ups. Some of them don’t work out, some need to change course, some need external help brought in. Claire Brown is a partner in the life sciences team at OSE, which has enjoyed extraordinary success, such as backing Vaccitech, which was co-founded by Adrian Hill and Dame Sarah Gilbert and helped to develop the Oxford Covid-19 vaccine before floating in the US last year. “We have to be disciplined,” Brown says of OSE’s investments. “We cannot be the investor of last resort. We are custodians of Oxford innovation. It comes down to discipline and having honest conversations with management.”
Some of the challenges, however, are Oxford-specific. One of these is property, or the lack of it. Pete Wilder, OSE’s head of property, tells me that businesses are looking for about 500,000 sq ft to 1m sq ft of space in Oxford at the moment but that only around 50,000 sq ft is available. “Property is a tremendous issue,” he says. “There is not a suitable pipeline for businesses.”
Wilder is trying to address this shortfall. OSE has partnered with property developer Lothbury to redevelop the Clarendon Centre, a shopping centre in the heart of Oxford, into laboratories as well as accommodation, offices, restaurants and some shops. The scheme represents two trends in the UK coming together in one £200 million project - the demise of high streets with the rise of the tech and science industries. The development is due to be completed in 2024. Wilder says old shopping centres “lend themselves well” to being converted into laboratories because they already include facilities like a goods lift and delivery areas. There are other schemes in the works in Oxford, including the £700 million Oxford North scheme, which covers 64 acres and combines labs, offices and space for start-ups with public parks, a hotel, shops and 480 new homes. OSE has also developed a shared workspace for start-ups in its head office called Grassroots.
Ultimately, this is a welcome problem to have and shows how areas outside London are flourishing in the UK. However, it is also a problem that must be addressed or opportunities will be lost. This brings us back to the importance of infrastructure. It takes a collection of stakeholders coming together to solve this, including national and local government.
As a reminder, Oxford is third on the UK government’s levelling up power tech league, which tracks investment, employment and start-ups in cities across the UK. I will be visiting the other nine places on this list soon. These are Cambridge, Manchester, Edinburgh, Bristol, Leeds, Birmingham, Newcastle, Cardiff and Belfast. There will also be roundtable events for subscribers about each of these places, where we will discuss what is working and what is not for each of these cities and I will discuss what I have learned from visiting them. I will be announcing a date for the Oxford event soon. If you are interested in attending in-person or virtually please contact me at graham@offtolunch.com. You must be subscribed to Off to Lunch to attend, and you can do so by clicking the link below.
A chart that helps you understand the world…
There is interesting research from Capital Economics and covered in the Financial Times that warns about the financial hit facing households on fixed-rate mortgage deals as interest rates rise. About 83.1 per cent of mortgage holders are on fixed-rate deals, with 32.7 per cent of these on deals of two-years or less, according to the piece. These households face a notable increase in their monthly mortgage payments when their current deal expires and they have to agree a new deal with their lender. As the graph above shows, rates on two-year mortgages have increased dramatically since the end of last year – more than doubling on some of the mortgages outlined above in Bank of England data about the market. In fact, according to the Bank, mortgage rates rose at their fastest pace in a decade in the six months to the end of May. I think this research gets to the heart of the issue about rising interest rates - the impact on households is going to be spread out across many months as they come to renew their mortgage deal. For many of these households, these new deals will mean a big increase in monthly payments and another squeeze on their budget.
You should also read this
The FT’s Henry Mance has spoken to Michael Lewis, author of The Big Short, Moneyball and The Premonition, about his work, US politics, and lessons from the Covid-19 crisis. Lewis is concerned that lessons from the pandemic aren’t being learned and state leaders in the US aren’t being held to account for the high death rates in their area. He also puts the chances of Donald Trump being president again at 18.3 per cent (FT, paywall)
Did privatisation in the 1990s really get Britain’s railways back on track? Or was British Rail already making progress? A new book on the history of British Rail and nationalisation encourages a rethink (FT, paywall)
How do you find 5,000 different books to stock a new bookshop (My bookshop adventure)
Escape rooms, puppy yoga and vertical villages – how office landlords are encouraging staff to come back to the office (The Times, paywall)
Finally, for those who missed it, you can read Off to Lunch’s review of the Sunday papers here.
And finally…
Some quick recommendations from the weekend…
Leeds-based Northern Monk’s session IPA Eternal is better than similar beers from the celebrated London-based craft brewers…
I have listened to the first two episodes from the new series of Malcolm Gladwell’s podcast Revisionist History. It is well worth your time. The episodes are a fascinating look at experiments and what we could find out but choose not to due to ethics, costs and logistics. These episodes focus on scientists and psychologists suggesting “magic wand” experiments that they could never actually do but would like to. A word of warning, some of the suggestions are not for the faint-hearted or easily offended….Gladwell’s own suggestion is an experiment around the Covid-19 vaccine and whether sceptics would be more likely to take it if it was a rebadged as a supplement and simply added to food like salt. In other words, how much of the scepticism around the jab is due to people not liking needles. The link to that episode is below…
Wimbledon quarter-finalist and new star Jannik Sinner – who plays Novak Djokovic next – is another reason to recommend David Epstein’s book Range, which explores the benefits of being a generalist and having a range of experiences rather than overspecialising. 20-year-old Sinner was a talented skier while growing up in Italy and only turned to tennis as a teenager. He has credited his cool mentality and movement to his skiing skills.
Thanks for reading. Off to Lunch will be back on Wednesday. If you want to contribute to the work of Off to Lunch, read Friday’s newsletter and attend our forthcoming events then please sign up for a paid subscription below. Please also share Off to Lunch if you enjoy it.
Graham