David Richards MBE is right, the UK’s innovation economy has become addicted to grants, not growth. But the problem isn’t funding itself; it’s design. Innovate UK and its peers were meant to bridge the early-stage gap between research and market, but instead became destinations in their own right. Government now competes with, rather than commissions, the innovators it should empower. The fix is simple: commission outcomes, not applications; fund practitioners, not paperwork.

Contents

Introduction

When I first met David Richards, he was scaling WANdisco, and we explored using its distributed computing platform to strengthen the Home Office’s Border Control system; real engineering, real outcomes. So when I read his recent Yorkshire Post piece, “Government grant perils for tech start-ups”, I knew exactly what he meant.

He’s right: too many UK founders measure success by the number of Innovate UK bids won, not products delivered. But the reason isn’t laziness, it’s structure. Venture capital arrives too late. Angels are too small and too cautious. Regional funds are inconsistent. So the government stepped in, and over time, built a machine that funds compliance instead of competence.

Overview

Richards argues that the UK’s tech start-up culture has become too dependent on government grants rather than customer traction or market validation. This “grant culture” risks hollowing out Britain’s potential as a serious technology economy.

Key points

• Many UK start-ups orient themselves around grant applications rather than customers or investors.
• Success is measured in Innovate UK awards won, not revenue or signed clients.
• Grant funding creates perverse incentives; founders become skilled at writing bids, not building products.
• Teams often cling to grants even when customer feedback shows the idea isn’t working.
• The US model (venture capital-led) is brutal but market-driven: sell, scale, execute.
• The UK model (grant-led) encourages dependency, not delivery.
• The core issue is capital: Britain has ideas but lacks a deep pool of scale-up investors.
• Institutional money (pensions, funds) flows to California, not to Cambridge, Manchester, or Sheffield.
• Until capital markets mature, government funding will remain essential, but risky if it drives the wrong behaviour.

Critique

Strengths

• He’s right that grant-chasing can displace commercial discipline.
• The “bid-writing culture” is real: Innovate UK and Horizon have unintentionally built a cottage industry of grant professionals.
• The warning about shallow venture capital outside London is valid: the regions are structurally underfunded.
• His focus on scaling and selling over subsidised survival echoes what real founders feel.

Weaknesses

• He frames the issue as grants vs venture capital, but misses the nuance: both systems have distortions.
• Many early-stage technologies (especially deeptech, cyber, AI safety, energy, medtech) cannot find VC backing until risk is reduced: that’s what grants are for.
• The problem is not the existence of grants, but the lack of structured pathways from (i) grant, (ii) product, (iii), (iv), revenue, (v) private capital.
• His critique doesn’t distinguish between industrial R&D (which needs public co-investment) and lifestyle grant-chasing startups (which don’t).
• By glorifying US VC culture, he ignores the toxicity and short-termism it often breeds.
• His “the answer is capital” refrain skips over governance and incentives: what are we funding, for what purpose, and who measures success?

Digging a Little Deeper

The Problem Isn’t Grants: It’s the Grant Economy

Britain didn’t create a startup ecosystem; it created a grant ecosystem. Success is now defined by bid writers, consortia choreography, and “innovation theatre.” Projects are designed to win competitions, not customers.

The result?

• A parallel economy where paperwork outperforms prototypes.
• The same few institutions orbit every funding call.
• SMEs and practitioners, the people who actually build things, have been reduced to subcontractors.

The government filled a capital gap, but in doing so, it built a bureaucracy.

Government as Competitor and the Illusion of Permanence

The flaw isn’t moral; it’s structural. The state has drifted from commissioning outcomes to competing in the market.

• Police CyberAlarm, while commissioned with good intent, illustrates the structural problem. Once government-funded tools are distributed for free, they distort the market, competing with SMEs rather than complementing them. It’s not about bad faith; it’s about unfair advantage.
• NCSC’s tooling is now in an ascendant phase, scanning, expanding, and trumpeted as proof of “public good.” But it won’t last forever. We’ve seen this arc before: pilot, expansion, decline. When the DSIT Cyber Growth Action Plan’s halo fades and budgets tighten, the same question will surface: who pays to keep the tools alive?
• Meanwhile, government tools end up competing with each other, Police CyberAlarm, NCSC scanners, and MOD internal apps, while private innovators are told to stand aside. That isn’t value for money; it’s duplication disguised as delivery.

The capital market’s invisible hand is still the only system that forces evolution and endurance. Whitehall’s role should be to define the problems that matter, and then commission the market to solve them. Every time it builds instead of buys, it suppresses the very capacity it claims to grow.

The Broken Continuum

Innovation funding should be a pipeline:

1. Research
2. Prototype
3. Pilot
4. Procurement
5. Scale.

Instead, we have fragmentation. Innovate UK funds the prototype. MoD funds the pilot. No one buys the outcome. Each department behaves like a separate investor with no obligation to pass projects downstream. The result: perpetual “innovation cliffs” where great ideas die in the gaps between grants.

The False Binary

Richards contrasts bureaucratic grants with brutal venture capital. Both are flawed. VCs chase exits, not ecosystems. Government chases process, not outcomes. What we need is the middle ground: commissioned innovation; public funding deployed through practitioners to solve defined problems with measurable results.

Commission, Don’t Compete

The answer is simple:

• Fund the question, not the proposal.
• Reward results, not relationships.
• Procure outcomes, not optics.

The government should publish challenge statements, e.g., “Detect compromised IoT devices in NHS networks”, and commission innovators to solve them. Pay for proof, not PowerPoint.

The Regional Proof (or the Chance to Make One)

Even David Richards hints at it himself: innovation shouldn’t live only in London or San Francisco; it should thrive in Sheffield, Huddersfield, Birmingham, Coventry, and every overlooked place with grit and brains.

That’s where proof could finally happen. In the West Midlands Cyber Hub, Midlands Cyber, and IAWM, practitioner-led delivery is already showing signs of outperforming consultancy theatre, real engineers, academics, and entrepreneurs solving real problems with speed, frugality, and visible impact.

If Innovate UK truly wants reform, it doesn’t need another white paper. It needs to back what’s already moving, to test its new funding philosophy where innovation already happens without noise, and let the regions prove that delivery led by doers can outlast any policy cycle.

From Subsidy to Sovereignty

Dependency isn’t inevitable. But if the government keeps measuring success by how many grants it awards rather than how many companies scale, we’ll stay trapped in a cycle of paperwork over progress. Every pound that goes to another “innovation ecosystem” workshop could instead fund a prototype, a testbed, or a residency. If the goal is sovereignty in AI, cyber, or quantum, then fund builders, not bid writers.

The Fix

1. Replace grant competitions with commissioned challenges.
   Frame the problem, fund the answer, buy the outcome.
2. Create a national “Innovation Ladder.”
   Link Innovate UK, DSIT, DASA, and MoD funding into one continuum.
3. Benchmark delivery, not activity.
   Publish public dashboards on results, IP, and jobs created.
4. Fund practitioners first.
   Require every award to be led by an operational delivery body, not a consultant.
5. Back the regions.
   Use the West Midlands as a demonstrator, a working model of practitioner-led, outcome-driven delivery.

Conclusion

Richards is right about the symptom, but the cure isn’t to end grants; it’s to evolve them. Britain doesn’t need fewer innovators. It needs a smarter state that commissions outcomes, funds practitioners, and stops competing with the people it claims to empower. Because innovation isn’t a form to fill in. It’s a system to build, and that system starts with practice, not policy.