Nesta Impact Investments, the investment arm of UK-based foundation Nesta, has made four investment as part of a new strategy to back impact-driven early-stage technology companies
The investment arm of UK innovation foundation Nesta has made the first four investments under its new £50m (€58m) strategy to nurture early-stage technology companies making a social and environmental impact.
More than half of the £50m fund run by Nesta Impact Investments (NII) is to be invested directly in early-stage startups over the next five years. Seed-series A stage startups will be eligible for investments of £500,000 to £1m, with the potential to receive up to £4m over multiple rounds. Nesta plans to make five to 10 investments a year under the strategy.
The remaining capital will go to Mission Studio, a joint venture between Nesta and Founders Factory – a UK-based provider of investments to launch new mission-led startups – as well as supporting grant-making initiatives. NII has invested directly in over 30 early-stage companies from two previous funds since 2012.
NII’s parent Nesta was created in 1998, as the UK’s first publicly supported national endowment with an initial £250m of National Lottery funding. It is a very different organisation now, as Lisa Barclay, executive director of Nesta Impact Investments explained to Impact Investor earlier this year.
Since Ravi Gurumurthy took over as Nesta chief executive in 2019, NII has tightened its focus, now backing startups with high-impact solutions in one of three areas: giving every child a fair start, allowing people to live healthy lives, and enabling the economy to work for both people and planet sustainably.
The first three investments under this strategy were all founded by women: a tech-enabled childcare platform Koru Kids, a Type 2 diabetes reversal programme Habitual Health, and a weight loss pill that achieves similar results to a gastric balloon developed by Oxford Medical Products.
To those has just been added a £1m investment in Naked Energy, a UK-based firm that combines solar photovoltaic and solar thermal technology to generate both electricity and heat from a single collector highly efficiently. The investment is part of Naked Energy’s Series B funding round which is targeting at least £10m. Barclays and ELM Companies are other investors in the round.
Funding plus expertise
Nesta says that, in addition to the funding, investee companies will benefit from expertise of its in-house team and wider networks, including policy and governmental knowledge, data skills and research capabilities. As the investment capital is sourced from the organisation’s permanent endowment fund, portfolio exits can be timed to maximise value and impact, according to Nesta.
Barclay said the objective for the team and the wider Nesta organisation was to help founders thrive while staying true to their social or environmental goals.
“We believe that being purpose-led and creating a scalable tech company can go hand-in-hand, as long as the right support is in place. That’s why, as investors, we bring so much more to the table than just capital,” she said.
Rachel Carrell, CEO and Founder of Koru Kids, one of the early recipients of funding, said Nesta had already added value from informal advice to enabling the firm to access speaking events at important events.
Koru provides a service to help families find suitable childcare from childminders to nannies. Carell said services like Koru’s were needed because the UK childcare sector was “in a complete mess”.
“We’re creating a whole new system which is better for parents, child carers and children. And we are really excited to partner with Nesta to make this vision a reality and offer more children a fairer start,” she said.
NII’s current portfolio, built up prior to the new strategy, also includes digital educational resources platform Bibliu, AI skin cancer tool Skin Analytics and Arbor, a data and software provider for schools.