You may not be aware of this, but even as we speak, the European Space Agency’s Sentinal 5 satellite is circling the earth monitoring air quality and the prevalence of potentially dangerous chemicals and gases such as methane, sulfur dioxide and carbon monoxide. In the not too distant future, it will be joined CO2M, a satellite designed specifically to monitor carbon dioxide as part of the fight against climate change.
Both satellites deploy technology designed and built by Glasgow-based company M Squared Lasers. A manufacturer of narrow beam lasers, the company provides equipment to a range of industries and hopes to be a leading player in the fast-emerging field of quantum computing. With a turnover of £ 16.4 million recorded in its 2020/2021 accounts the company employs 100 people and has facilities in Glasgow and the Plexal Innovation Center in London.
As such it is, arguably, just the kind of entrepreneurial business that policymakers in the UK are anxious to promote. Cutting edge science-led and part of an advanced manufacturing base that creates well-paid and highly-skilled jobs. Last year, the ambition to put science and R&D at the heart of Britain’s growth strategy was codified in the UK Innovation Strategy, a document published by the government, placing research and its commercial exploitation at the heart of the post-Covid Build Back Better program.
So when I spoke to one of M Squared Laser’s founders, Dr. Graeme Malcolm OBE, I was keen to talk about the realities of growing a successful science and technology-led company in a country that hasn’t always had a great reputation for turning the IP developed in labs into marketable products.
Dr. Malcolm entrepreneurial journey began in 1992 when he started his first company, Microlase Optical Systems. As he acknowledges, it was an era when entrepreneurial scientists were something of a rarity in Britain. Or to be more precise, there was science research in abundance, but the skills associated with identifying and pursuing a market were lacking.
“When we started back in 1992, there wasn’t much of a startup culture,” he says. “We didn’t even have the internet.”
At that time, Malcolm’s approach was to work with partners in the US “We partnered with Silicon Valley – we focused on science and technology. Silicon Valley was very good at seeing technologies play out. ”
A Niche Market
M Squared Lasers itself was founded in 2006, with a very clear idea about the technologies it would develop. The mission was to focus on creating ever-narrower beams of light. We decided to concentrate on a niche, ”says Dr Malcolm.
As he observes, while Britain still has a residual reputation for not fully exploiting the commercial potential of its science base, things have changed. “On an ecosystem level, the UK has huge advantages. “Wherever you are in the UK, there is always a world expert available within about three hours.”
And while much of the international focus on Britain’s technology entrepreneurs is on hubs such as Cambridge, Oxford, London and Bristol, Dr. Malcolm cites Glasgow as a city in which the old industrial and engineering base has left a legacy that benefits a new generation of entrepreneurs. He cites the presence of Strathclyde University – which has positioned itself as a “place of useful learning” with a strong bias towards technology teaching and research. Recently, the University has been working with M Squared on Quantum computing. “We are working in a city that has all the elements to be world-class,” Dr Malcolm says
But the challenge facing any science company is marketing and selling into clearly defined markets. Or to put it another way, turning the science into something that people want to buy.
In terms of the science, M Squared has focused on developing lasers with a narrow linewidth. It’s a niche but one where there are a lot of commercial applications across a range of industries, including security and defense, food and drink, oil and gas, quantum computing and the aforementioned space sector.
So how do you do the R&D while also staying profitable? Well, it’s a mix of manufacturing equipment for industries where there is a pre-identified need while constantly looking ahead for new opportunities.
“About 80 percent of what we do is manufacturing standard products – so we make a relatively small number of things that are scalable,” Dr Malcolm says. “Then about 15 per cent is looking ahead for the next growth platform and 5 percent is looking for the blockbusters.”
Points Of Change
Manufacturing well-defined standard products means that the company can generate profits while looking for the next big thing. This has implications for the company’s philosophy on raising finance. “Our approach to capital has been to raise it when it is needed,” says Dr Malcolm. “For instance, we raised money from the Business Growth Fund to finance our marketing operation in the US. Capital is about points of change. ”
More generally, he says a key challenge facing science-led businesses in the UK is to find patient capital. Companies that develop hardware products can have long timelines and in the past, this has been a deterrent to VCs. Dr. Malcolm says this is something of a golden age for Britain’s science-led companies, assuming the business models are in place. “The capital is there,” he asserted.
Looking to the future, M Squared Lasers is seeking to develop the technologies that will help address global problems – the ESA satellite missions being a case in point – and quantum computing will also remain central to its development plans.
But as Dr Malcolm stresses, the R&D is underpinned by-products that already have a profit-generating market. More generally, for businesses that deal in hardware development there is a continuing need for patient capital.