Cambridge cluster makes its mark

The Cambridge cluster ranks fourth among European clusters in terms of total European institutional investment (after London, Paris and Tel Aviv respectively). In addition, Cambridge takes a dominant position in investment per capita, coming first among European clusters.

However, overall institutional investment in companies in the cluster fell to £135m in 2006, from £167m in 2005. In addition, Cambridge’s share of deals made by the top 20 European clusters has shown a reduction from 9.3% in 2005 to 5.6% in H1 2007.

The cluster’s drop in investment and deals is attributable to the rise of investment in soft innovation such as service and retail, web and mediatech investments. Cambridge has seen limited activity in this sector. Traditionally Cambridge’s strength has been hard technology, and these sectors have continued to dominate. Cambridge is the leading IT hardware cluster outside of Israel and the third most important area for healthcare & life sciences investment.

The report also illustrates the importance of US financial support in the success of European venture backed cluster companies. Cambridge saw 25% of the deals into the Cambridge Cluster involve at least one US investor in H1 2007. For example, Kudos received much of its £30m final round of funding from US supporters. Cambridge companies should leverage not just this expertise but that found in clusters worldwide, thinking globally from the outset. Tel Aviv, which saw 56% of deals into the Israeli cluster involving a US VC in the same period, could serve as a model.