The path to net zero for SMEs: ESG and carbon accounting software deep dive 2024

ESG and carbon accounting deep dive factbase

At Nesta Investments one of our priorities is to invest in technology that helps SMEs make progress to net zero while raising their productivity. A fundamental activity is understanding their carbon footprint and what action they could take to minimise it while improving the efficiency of their business operations. Meera Shah, Investment Analyst in Nesta’s Impact Investing team, has done a deep dive into this sector and mapped over 290 companies active in the UK, Europe, North America and Asia-Pacific (APAC) region. We wanted to identify any investable ‘white spaces’ in this market. Our market map is not exhaustive and is a snapshot of a particular moment in time. We welcome suggestions of companies to add to this list and any comments or questions you may have to support building the industry-wide knowledge base in this area. 

You can explore our interactive solutions map and our factbase (including EU and UK regulatory context).


  • Venture capital investment into the broad area of climate fintech has increased in recent years, with particularly rapid growth seen in the last two years. With $2.9 billion invested globally, 2022 saw 142% year on year growth from 2021 ($1.2 billion invested globally) and was over three times the 2020 total. 2023 matched this with $2.3 billion invested across Europe and the US.
  • Existing and emerging regulations, such as the Corporate Sustainability Reporting Directive (CSRD) in the EU and the Companies Climate-related Financial Disclosure Regulations (CR22) in the UK, are driving the need for solutions. These regulations currently affect large corporations and financial institutions, which will need to report on their emissions, climate risks and opportunities through annual disclosures. SMEs are not currently required to disclose against any frameworks, but they will be impacted by supply chain reporting for their corporate clients and finance providers.
  • There are many well-financed solutions for carbon accounting and an increasing number of entrants to the market. These solutions are mainly focused on large corporates.
  • Europe is the largest market, by number of companies, which is expected given the pace of regulation compared to North America and APAC. This is highlighted in the diagram here, with the bubbles representing the number of companies in each region offering ESG and carbon accounting tools. 

Source: Nesta Investments


  • We anticipate a rise in US activity once the recent Securities and Exchange Commission (SEC) ruling on climate information disclosure across scopes 1 and 2 is unpaused. Some individual States have introduced climate information disclosure across scopes 1, 2 and 3. The introduction of subsidies and tax breaks under the Inflation Reduction Act (IRA) in the US may also generate the need for climate data disclosure solutions to evidence impact. 
  • There is not much technical differentiation between products. The common functions are: 
    • data collection
    • measurement 
    • goal setting 
    • reduction recommendations 
    • reporting. 
  • However, some platforms are offering additional features or points of differentiation, such as: 
    • functionality to enable offsetting 
    • marketplace models 
    • support for supply chain management 
    • financial grade or audit-ready platforms. 
  • While the market is undoubtedly crowded with the first wave of carbon footprint and ESG reporting solutions, we can see space for innovation in automating life cycle assessments (LCAs) and supply chain management, tracking decarbonisation and reporting on scope 3 emissions, especially with SMEs in mind.   
  • There is a market timing risk in building solutions specifically targeting SMEs, especially with changes in regulatory timeframes as well as advances in AI. However, given the increasing challenges that they face in managing and mitigating against climate and ESG risk, and the importance of SMEs to the economies of all countries, solutions in this area have the potential to be highly impactful.  
  • Solutions for SMEs should have features such as high levels of automation and actionable insights, links to support that would otherwise be hard to find (for example, green finance, materials or suppliers), and the ability to share data up and down the supply chain.  


Environmental, social and corporate governance (ESG) reporting and carbon accounting tools are part of a broader climate fintech category for companies who are operating at the intersection of climate, finance and technology and supporting the transition to a greener economy. Investment into this area has been increasing over the past few years, with $2.3 billion invested across Europe and the US in 2023 and $2.9 billion invested globally in 2022, in spite of overall venture funding declining in this period and dropping to 6-year lows in 2023. This is largely due to regulatory pressures and complex reporting requirements driving the need for solutions to support action on ESG and carbon tracking. Large corporations and financial institutions are being directly impacted by current non-financial reporting deadlines. While SMEs do not currently have the same deadlines, they will be impacted by:

At Nesta Investments, we are looking to invest in solutions, such as ESG and carbon accounting tools, that support businesses, and especially SMEs, in the transition to net zero. This is because we believe that the switch to a greener, lower-carbon economy can also increase the UK’s productivity. We focus on SMEs as they represent a significant percentage of employment not only in the UK (~61%) but worldwide (over 50%).

With an increasing number of companies competing for investment in this area, we set out to map the universe and identified 298 companies providing digital tools and intelligence for ESG and carbon accounting across the UK, Europe, North America and APAC. With a demonstrably crowded market, we sought to identify whether there were any tools with differentiating features or market ‘white space’ which could present attractive investment opportunities.

What are the UK and European regulations driving the inflow of capital into this area?

The EU is further ahead than the UK in terms of confirming the detailed regulation and associated reporting timelines for businesses of all sizes. The key regulatory frameworks in place across the two regions are as follows, with a more detailed list and overview provided in the reference factbase.


  • Corporate Sustainability Reporting Directive (CSRD) – this replaces the previous Non-financial Reporting Directive (NFRD) and requires large companies based in the EU or listed on an EU regulated market to report on sustainability issues such as environmental, social and human rights as well as governance factors. It will come into effect in 2026 for listed SMEs who will be able to opt out for a two-year transition period.
  • Sustainable Finance Disclosure Regulation (SFDR) – reporting against a range of environmental, social and governance metrics for sustainable investment products to increase transparency in the market. This came into effect in 2021 and applies to all companies operating in the EU. ESMA (the EU’s financial services regulatory supervisor) has published guidelines to support clearer/evidence-based labelling of the environmental and sustainability characteristics of funds, including that funds promoting a particular sustainability focus may need to invest at least 80-60% of its assets into environmental/socially impactful companies
  • EU Taxonomy – science-based classification system with six specific objectives, establishing which economic activities can be considered environmentally sustainable. It requires companies to disclose the proportion of their activities that are taxonomy eligible or taxonomy aligned. It has been phased in since coming into effect in 2022. 


The FCA also announced TCFD-aligned reporting requirements, which came into force from 1 January 2022 for the largest firms with more than £50 billion in assets under management (or £25 billion assets under administration for asset owners).

  • Sustainability Disclosure Requirements (SDR) – streamlined disclosure framework for sustainability information in the UK, bringing together new and existing sustainability reporting requirements for business, the financial sector and investment products, as outlined in the Green Finance Strategy. The final rules for asset managers were published by the FCA on 28 November 2023. In terms of confirmed timings for the SDR, the anti-greenwashing rule applies from 31 May 2024. The labelling regime and rules for distributors will apply from 31 July 2024 and the naming and marketing rule and the pre-contractual disclosures will apply from 2 December 2024. Finally, the sustainability product report and the entity level disclosure requirements will apply from 2 December 2025, subject to phase-in requirements. A consultation on a proposal to extend the SDR to UK portfolio managers has recently closed and a final decision is expected in the second half of the year.
  • International Sustainability Standards Board (ISSB) – established to develop a global baseline of sustainability disclosures, with the first two standards (S1 General Requirements for Disclosure of Sustainability-related Financial Information and S2 Climate-related Disclosures) published on 26 June 2023. The TCFD framework forms the basis of these standards and the UK government recently announced plans to endorse them in Q1 2025. 


There are many interconnected frameworks and standards coming into effect on different timescales and requiring differing amounts of information. The need for solutions to support businesses to act on these requirements and make changes in an easy and efficient way is a clear driver for investment in this area. There will also likely be a merging of carbon and financial reporting, especially given that TCFD reporting is completed annually. Software which enables this in a frictionless and secure environment will be in a favourable market position.

Given the large number of businesses operating across both regions, governments and international institutions are under pressure to keep disclosures aligned and minimise burden on businesses. We have therefore looked at solutions outside the UK as part of our landscape mapping as we believe they could, either now or in future, be applicable to the UK. 

How much is being invested and where is the investment going?

In terms of geography, it was reported that in 2023 European climate fintech companies raised $1.4 billion, while their US counterparts raised $881 million. Within the category, Sifted reported that the distribution of the $2.9 billion global funding for climate fintech solutions in 2022 was most heavily weighted to carbon accounting solutions ($970 million), with ESG solutions having only 20% of the investment in comparison ($186 million). Pitchbook also reports similar levels of investment into carbon accounting and analytics tools ($1.2 billion) in 2022. With a PwC Strategy& report suggesting a European and North American total addressable market (TAM) of more than 9 billion ($9.8 billion) in 2021, it is easy to see why an increasing number of companies are creating and investing in solutions for this market.   

We identified 298 such companies, which we segmented according to the following product groups. Depending on their range of features, companies were assigned one or more product group labels.

Product groupDefinition
Carbon accounting platformSoftware which analyses and tracks a company’s scope 1,2, and/or 3 emissions.
ESG assessment platformSoftware which supports the assessment of a company’s ESG credentials. If a company claimed to report on ESG but only offered carbon solutions, these were not included.
Climate action platform
Software which facilitates emissions reduction, for example through trajectory modelling, actionable recommendations, link to network of ‘sustainable’ suppliers etc.
Carbon offsetSoftware which supports carbon offsetting, for example through providing a marketplace or services to facilitate purchasing of carbon credits.
Intelligence platformSoftware which provides aggregated intelligence for businesses, such as competitor/industry ratings or verified data for calculations etc.
Environmental impact assessment platformSoftware which supports the assessment of a company’s environmental impact, such as through life cycle assessments (LCAs).
Supplier management platformSoftware which manages supplier data for supply chain reporting, for example through integrations to their data sources. They typically provide features for collaboration, support for supplier decarbonisation etc.
Certification providerPlatform/organisation which assesses company claims and provides verifiable kitemarks to prove ESG/carbon credentials.


Number of companies segmented by product group


Source: Nesta Investments


You can filter solutions by product group, investment dollars raised and geography in our interactive map.

Our segmentation highlights the concentration of companies in the carbon accounting and ESG platform space. When analysing the products further, we found that many of these companies are offering the same set of core features as part of their product, such as data collection (automated or manual), measurement, goal setting and reduction recommendations, and reporting. They are only really differentiated through price point or geographical focus. 

To stand out in this market, additional features or points of differentiation offered by some platforms are:

  • sector-specific tools, which provide deeper insight or more tailored functionality for investments, retail, food, construction etc
  • links or functionality to enable offsetting
  • marketplace models with renewable energy providers
  • superior technical products, such as accounting/financial grade platforms
  • links to/support for suppliers, such as decarbonisation recommendations or easy ways to share data/reporting
  • links to/support with obtaining green finance.

Given our focus on SMEs, we completed a high-level mapping on whether the solutions identified could support SMEs. We identified 28 solutions specifically for SMEs and a further ~182 which had solutions for both corporates and SMEs or the potential to support SMEs. 

The SME market is highly fragmented, and companies are typically time and resource poor. We believe that investable solutions should therefore have features such as:

  • affordable price point and frictionless onboarding
  • network effect where there is a benefit to inviting stakeholders onto the platform
  • high levels of automation and actionable insights
  • links to support which would be hard to otherwise find, such as green finance, materials or suppliers
  • ability to link to services, such as accountants and auditors
  • ability to share data up and down the supply chain.

However, it is important to note that regulation for SMEs is further behind than for larger businesses and therefore, as with all investment, there is a market timing risk. Solutions built today may not be fit for purpose for future regulations or they may not be required at all. Some questions to consider:

  • How important will granularity and accuracy of data be in future given the status quo today? 
  • Will corporates and regulated entities be able to fulfil their scope 3 reporting requirements by only using external data sources and industry averages without needing to reach out to their individual suppliers? 
  • How will changes in AI affect the ability to create technically defensible solutions? 

Despite the risks, supporting SMEs to manage and mitigate their climate and ESG risks, and thereby enabling a transition to net zero, is extremely important. Solutions built with SMEs in mind have the potential to be highly impactful and valuable investments, especially given the significant contribution of SMEs to the economy.

Stakeholder map of the ESG/carbon reporting market

Note: methodology

Our longlist of companies was compiled using: 

  • data from Crunchbase, Dealroom 
  • inbound applications from companies 
  • internet searches. 

We chose to focus on companies providing B2B digital solutions as their core offering rather than those which were B2C only or largely consultancy based. 

The companies were then segmented according to the following product groups: 

  • carbon accounting platform 
  • ESG assessment platform 
  • climate action platform
  • carbon offset
  • intelligence platform
  • environmental impact assessment platform 
  • supplier management platform
  • certification provider.

Information: This blog post has been produced by Nesta Impact Investments (trading name of Nesta Investment Management LLP, authorised and regulated by the Financial Conduct Authority, FRN: 485167, a wholly owned subsidiary of registered charity Nesta). The content is intended for information only, is not intended to be an invitation or inducement to engage in regulated investment activity, and is correct at the time of writing. Any companies referenced herein are included for illustrative purposes only and therefore this content should not be considered as a recommendation to invest in or an endorsement of individual products/suppliers.

With thanks to Andy Marsden of Nesta’s sustainable futures design team who helped design our logo map.

Funding future generations

Is pre-K investment about to boom?

All Aboard!

Directors’ Responsibilities: Not Just a Free Lunch  

Nathan Elstub 

A long time ago I wrote a blog on board information as a guide to our team and for people we invest in to help them design effective information packs for boards.  This was intended to be one of a series of blogs on the topic of effective governance, the rest of which never got written.  I have now been prompted to correct this, so here goes with round 2 of the series – what is the purpose of a board and  why do we need directors in the first place?

There are two interlinked answers to this question.  The first is a legal, technocratic one which is that in many legal jurisdictions including in the UK, a company has to have specified people (or companies) who formally hold authority, responsibility and to some extent liability to act on behalf of a company and to ensure that it is run in accordance with the law and with its own constitution.  

This means that as a director of a company you must have a fairly decent understanding of the various laws that govern company behaviour, such as responsibility for transparency and disclosure (accounts etc.) and for the wellbeing of stakeholders (health and safety, product liability, social and environmental obligations etc.).  Get this wrong and you might be banned from acting as a director, fined or even in some circumstances imprisoned.  

Whilst this is a responsibility to take very, very seriously, in reality this is probably the smaller of the two roles of directors.  The second, and in my eyes more significant one is that as a director you are responsible for setting the direction of the company and ensuring that the company makes progress towards its intended destination.   

Each company will set its own destination and goals.  In the first instance these are set out in the company’s constitutional documents – every company has an “Object” or series of Objects that set out what it exists to do.  These are sometimes drafted very widely, sometimes very narrowly, but in all cases everything that directors allow or instruct the company and its employees to do have to be in line with the company’s Objects.  These Objects are also the crossover between the legal framework the company operates in and the boundaries to the strategic, operational plans that the directors are responsible for creating and delivering.  

The company’s strategy should be a statement of the board’s intended destination and goals, in line with its Objects, together with an assessment of how its current resources and capabilities can be used and extended to enable the destination to be reached and goals achieved.  Ultimately the company’s success or otherwise in setting effective goals and destinations and achieving them is your collective responsibility as a board and your personal responsibility as a director.  

So why is it important to set out this stuff?  Well, in my experience, many boards don’t act as if they genuinely understand these roles and are not chaired in a way to ensure that they do them really well.  In many, many companies attending a board meeting feels like a tick box exercise, an opportunity for a bit of ego massage, an excuse for a nice lunch, or a way of earning a nice sum for doing not much work once you have got bored of having a full time job and are on your way to retirement.  

As a director your role is to ensure that the company, its management team and employees are optimising their performance in achieving their strategic goals in a way that complies with law and best practice.  Being clear about this enables you to focus your time and energy on identifying where this is being done well so that you can encourage more of it, and spotting where things are not working so you can support management as they work through how to do them better.  A management team’s time is a limited resource.  Preparing for, and spending time in a board meeting is a big draw on their time.  Directors, and particularly the chair, should be ensuring that every agenda, meeting, discussion and board information pack is single-mindedly focussed on identifying and enabling performance enhancement opportunities – this ultimately is your purpose.  If you can have a decent lunch and massage your ego on the way, even better!


Improving funding and support for minoritised entrepreneurs

How our investment teams are helping to level the venture capital playing field

We are proud to announce that Nesta Impact Investments has been certified as a Level 2 Diversity VC Standard fund. Now we want to create even better outcomes for diverse founders and our investment teams.

At Nesta, we want to make sure that the capital we invest is accessible to everyone, and that the companies we invest in are supported in the best possible ways. As has been shown by multiple reports, over the past 10 years, teams led by minoritised ethnic groups or female entrepreneurs have received a fraction of the available VC funding compared to all-white teams and male founders. Funding is also skewed along particular socioeconomic lines, for example 72% of VC funded businesses have founders who went to “top tier” universities. Investors need to do more to address the barriers to funding that diverse founders may face and we are proud to be making progress in this area, both across our impact investment work and via our Mission Studio partnership with Founders Factory.

The benchmark for inclusivity in the investment sector is the Diversity VC Standard, an assessment and accreditation process that sets guidance for best practice when it comes to diversity and inclusion in the venture capital (VC) sector.

Diversity VC Standard accreditation – what it is and why it matters

The assessment reviews a wide range of practices, ranging from how deals are sourced, to investment processes, recruitment and how organisations work with portfolio companies, alongside internal Equity, Diversity and Inclusion (EDI) policies and initiatives. The Standard was launched in 2020 by the nonprofit Diversity VC, in partnership with Diversio and OneTech, to improve practice across the industry and bring together a community of committed investors. As the accreditation is a holistic certification that recognises everything an investment fund does, it was important for us to view our VC practices in connection with Nesta’s wider ED&I commitments.

Nesta’s Impact Investments and Arts and Culture Finance teams have been certified as some of the highest performing fund managers that have participated in the certification process to date. In many ways, this is just the beginning of our journey, so we thought it would be useful to share how we got here and to assess the future potential.

What we did to get here

Last March (2021), Nesta launched a company-wide EDI strategy.

As part of this strategy, Nesta’s Investment team carried out a literature review of the latest research on diversity in the venture capital industry. Then we reviewed over 35 different aspects of our own investment policies and processes. This included conducting a review of our own employee and portfolio company demographic data as well as our hiring practices and employee support programmes. We have also rolled out an environmental, social and governance (ESG) questionnaire, which includes questions on diversity, for our portfolio companies. With this data we will be able to benchmark and support our current portfolios’ ESG performance in line with the VC sector.

Some of the key policies and practices that enabled us to be accredited to a Level 2 standard included:

  • internal policies: family leave policy; flexible work policies; harassment and discrimination policies; annual equal pay analysis; organisation-wide ED&I-specific goals; cultural competency training; having a chief D&I officer.
  • investment strategy: having an investment-specific ED&I strategy; having ED&I-specific investment targets.
  • recruitment: policies reducing bias in the hiring process; proactive engagement with recruiters focussed on diverse talent
  • external engagement: participating in diverse founder office hours.

Our findings also indicated that there were some key improvements that could be made to ensure we continue to improve on our equitable investment processes. These are:

  • ensuring transparent and easily accessible investment criteria
  • standardising initial founder meeting mechanics and questions
  • broadening our deal sourcing processes to proactively widen our applicant pool

What’s next for Nesta Impact Investments?

We are looking forward to joining Diversity VC Standard’s community of accredited funds, and to learning from and sharing with others how we can effectively improve EDI in VC. We have committed to an initial target – that by 2025, 25% of our investees will be led by those from minoritised backgrounds. However we hope to surpass this target!

Our initial priorities are to:

  • more rigorously collect ED&I data across our entire investment process
  • broaden the support we offer to our portfolio companies such as exploring training on EDI in tech and on how to collect ED&I data
  • support portfolio companies in recruiting diverse talent at the executive and board level
  • work to deliver our portfolio target of 25% of investee companies to be led by people from minoritised backgrounds
  • consider how to meaningfully incorporate socioeconomic factors into our investment process and ED&I strategy

Our Arts & Culture Finance team’s strategy for increasing the diversity of their portfolio can be found here.

Calling all founders

If you are a founder looking to raise capital and your business aligns with our investment strategy, please get in touch with us . We invest £500k-£1m in Seed-Series A ventures working in the areas of healthy ageing, edtech, foodtech, healthtech, climate tech, the future of work and productivity. These sectors reflect Nesta’s core impact goals:

Nesta is an impact investor, looking for high growth, commercial ventures that also deliver strong social or environmental impact.


Productivity: supporting young people into work

Nesta backs to create pathways to employment

It’s common knowledge that the pandemic has exacerbated inequalities in our society. This impact is particularly evident in the challenge young people now face when identifying job opportunities and a career pathway that suits them. Recent education leavers and young black workers were hit particularly hard through this period. ONS figures in March 2021 showed that almost two-thirds of people who lost jobs in the UK during the pandemic were under 25. Moreover, these past 18 months have fundamentally disrupted the career choices and progression routes of those leaving education. Covid also disrupted traditional entry routes into early employment, for example, many young people lost out on invaluable work experience opportunities. As we return to some semblance of normality, a new issue seems to be arising around a lack of job candidate supply with a boom in available vacancies.

The need therefore to support all young people (and employers) as we come out of the pandemic is acute, particularly in terms of ensuring social mobility and overcoming the Digital Divide. With more entry-level job application and interview processes shifting online, it’s more important than ever to ensure accessibility and equal opportunity for all.

With this challenging reality, we are excited to announce Nesta’s additional investment in, the UK’s leading jobs platform helping young people from all backgrounds to connect with the right employer, and offering employers the ability to both broaden and improve the quality of their hiring.

GetMyFirstJob’s impact

Since Nesta’s original investment in the platform in 2014, GetMyFirstJob has supported more than half a million young people by providing career guidance and support in finding relevant job opportunities. Despite an incredibly challenging 18 months navigating the pandemic, GetMyFirstJob has delivered 30% growth in sales, helping over 40,000 young people into roles in that time.

The company works with schools, colleges, training providers and employers to help connect young talent with apprenticeship, graduate and other entry-level opportunities. Its employer clients include Microsoft, Accenture, BT, DHL, Direct Line Group and CCEP. It also works with Further Education (FE) colleges and training providers to help young people into work. All of GetMyFirstJob’s clients recognise the need to do things differently in the post-Covid age, particularly by embracing digital solutions and AI to attract candidates or help them visualise opportunities. This approach has been proven to increase the diversity of employees. For example, some application rates from candidates in the lower Socioeconomic Status (SES) groups have almost doubled for some clients. You can read about one example with Microsoft here.

Supporting Nesta’s missions

Nesta’s new strategy launched in March this year, contains a focus on boosting productivity in the labour market as part of Nesta’s goal for a Sustainable Future. A key aspect of this strategy is to support people to navigate the world of work and support skills development to ensure people are equipped to adapt to the fast-changing needs of the economy. GetMyFirstJob plays an important role in supporting this mission by ensuring that young people from every background are inspired and able to connect with opportunities and employers that are right for them. This helps boost individual career prospects and overall social productivity. Nesta and GetMyFirstJob have already collaborated to explore interest in ‘green apprenticeships’ – exploring motivations around green jobs for young people.

Nesta’s follow-on investment of £125k, made alongside a further £125k from an existing shareholder, will allow GetMyFirstJob to extend its work in an important and expanding market, as young people and employers adapt to the roles required in the future workforce. We look forward to achieving more together with the GetMyFirstJob team.

This blog has been produced by Nesta Investment Management LLP for inclusion on its website (refer to the Terms of Use).  The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell the securities mentioned or subscribe to the Nesta Impact Investments 1 LP (an ‘alternative investment fund’ and ‘Non-mainstream Pooled Investment’, ‘NMPI’).  This blog is only intended for persons who may receive it under Section 238(5) of FSMA and COBS 4.12.4R.  Investment in early-stage companies involves higher risks such as illiquidity, lack of dividends, loss of investment and dilution.  Past performance is not necessarily a guide to future performance and investment places capital at risk.

Skin in the Game

We recently made a £500,000 follow-on investment in Skin Analytics, who are world leaders in using AI to help clinicians diagnose skin cancer, and so I sat down a few days ago to write  about the deal. Despite my massive and genuine excitement about this investment, I must admit that I’ve been putting off actually writing about it for a while. In these circumstances I find myself producing a sort of gushing boilerplate: Outstanding Management! Huge Market Opportunity! Game Changing Product! I do really think Neil and his team are world class, that they have the best evidenced and closest-to-market solution for AI dermatology, and that this could do a huge amount of good. But I always sound like just another VC shilling for his latest deal. 

However I woke up to see that Google had released a skin condition AI diagnostics app. To be honest I’ve had better starts to the day, but at least it gives me a chance to write something less predictable – what it feels like when Google comes to eat your lunch. 

As the day went on the board began to chat with management, and emails flew back and forth. The picture that emerged was, in the end, far more positive than we initially thought. Indeed if anything it left me with a higher level of conviction in the investment thesis than I’d had at the beginning. I wanted to expose the reasoning behind this to check if this is confirmation bias on my part; Am I being  foolish for being encouraged by the entry of the world’s largest tech company, with the richest body of AI expertise, into the area that our small startup is working on?

Firstly, let’s look at what Google has actually produced: a free app that is aimed at consumers and for a broad range of 288 skin conditions.  This is significantly different to Skin Analytics’ goal, which is  to produce a clinical grade device that sells into hospitals and health systems with, for the moment, a focus on skin cancers and pre-cancerous lesions. 

For Melanoma, which is far and away the most clinically important condition, Google’s published performance is pretty poor. It only catches 15% of melanoma as a primary diagnosis, and 60% as one of the top 3 diagnoses that their AI comes up with. This is a long way from being acceptable for clinical use. Skin Analytics achieves 95%. 

One of the things that we worked hard to establish at initial investment was that what Skin Analytics (SA) had managed to do was hard to do, and hard to replicate. Although Google had a different goal in building an app for a broad range of 288 conditions, I can’t believe Google will have been thrilled with an app that put out numbers on this level. Although SA will have to continue to develop and improve if they are to maintain their edge, it does give one some comfort to know that they are ahead of the curve. 

Secondly, there was no sign that Google is going after the clinical market for the time being. Developing what they have into a clinical product would take years, no matter how much money was invested into it. It would require a lengthy and fairly onerous prospective clinical study, which would take a year or two to complete and publish, as well as a host of other regulatory qualifications that are rightly associated with a medical device. It also requires software that integrates with clinical workflows, works in all clinical settings, on a range of devices, and offers the full feature set needed; a product as much as a technology. 

Thirdly, an app like Google’s will likely generate a lot of demand for dermatology appointments, going into a service that is already considerably overstretched in most countries. There will be an increased need for a clinically reliable triage tool in primary care, which is exactly what Skin Analytics have. 

So, if Google is going to enter your market area, it’s great if they do so by publishing evidence that they are not great at what you are very good at, and don’t seem to target the same customers you do, and are likely to increase demand for your product.

Of course there is risk that Google (or another competitor) catches up in performance and feature terms. SA will have to work hard to maintain their differentiation over coming years, improving the range and accuracy of their offer, and their product market fit. Further, there are still plenty of challenges for the company to overcome. But I’m somewhat more confident than I was two weeks ago that they can manage it, and a little nervous about being so!


eExperimenting with MEL Science – Nesta Impact Investments supports a new educational platform

Nesta Impact Investments recently completed a £1 million investment into MEL Science, a London-based science educational platform. Manish Miglani from the Investments team, explains the added value of this acquisition and how it will help Nesta close the attainment gap.

Investing in scalable solutions to tackle the world’s biggest challenges 

The ongoing Covid-19 pandemic and vaccination rollout has shown us yet again the power of science to help solve some of the biggest challenges. And yet many schools continue to see a reduction of interest and attainment of pupils in science subjects, especially in disadvantaged groups. 

So we’re delighted to share that Nesta Impact Investments has completed a £1 million investment into MEL Science, an exciting new platform that brings science to life through educational kits that combine hands-on experiments with interactive VR simulations and live lessons for use at home, in afterschool clubs and at school. This is our first investment since Nesta published its new strategy earlier this month, featuring its fairer start mission.

The attainment gap is high in science for pupils from disadvantaged backgrounds and in disadvantaged schools. Our due diligence reinforced that this leads to both lower science take-up and lower attainment, and key reasons have been lack of resources. There is also evidence of gender imbalances in STEM education. 

Therefore, there is a real need for a product like MEL Science to make science more accessible and engaging, specifically in secondary schools, and increase weaker pupil interest in science, all at a cost aligned with budget-stretched schools.

There is existing evidence from the results of New Jersey Institute of Technology (NJIT)’s research into how MEL VR Science Simulations improve learning outcomes which suggests that integration of such tech into the school curricula could be a viable solution to improve pupil engagement and outcomes in STEM education.

Nesta’s investment follows on from  a recent round of funding that the company raised in late 2020 from international investors such as Mubadala Investment Company, Channel 4 Ventures and other entities from Europe and China.

Vassili Philippov, Founder and CEO of MEL Science commented: “MEL Science is on a journey to build a new class of science education platform. One of our areas for growth is to deepen our educational impact. We want kids who use our products to be more curious and seek to solve problems. We want our kids to think like a scientist, to do better in exams, to study science at university and maybe even become scientists in future. We know society needs more scientific literacy for mankind to have a sustainable future. We are delighted Nesta is joining us on this journey. We hope Nesta’s support can help MEL Science deepen its impact with schools, after-school clubs and other institutions around the world.”  

This investment complements our investment backing last year for Empiribox, which is helping primary science education in the UK through its lesson plans, assessments, equipment and termly CPD. Empiribox has also launched an introductory free blended learning platform to assist schools continue their science education through lockdown.

This is the Year that Was – Nesta Impact Investment Team


Our investment strategy is designed to back companies aligned with Nesta’s broader strategic goals, one of our methods of scaling innovation and impact. A quick recap on Investment at Nesta – we have been investing in early stage tech businesses across Nesta’s history, scaling innovation and impact since 2012. We were one of the first “profit with purpose” investors in the UK. We look to support businesses where there is strong alignment between commercial success and social or environmental impact. 


As we embarked on this new year, we saw countless comments and reflections on the unprecedented challenges we all faced across the globe in 2020. There is no doubt 2020 was not a year any of us would choose to revisit, but in the face of hardship and uncertainty, we have been inspired by the innovation, creativity and resourcefulness we have seen both in our existing investment portfolio and in the founders we have met more virtually than physically across the year. 


Here’s a walk through the year of the Investments Team at Nesta:


Four days after the first national lockdown started in late March 2020, we led a £1.5m investment round in Q Doctor. Founded by Dr Chris Whittle (a doctor from the NHS’s CEP) who wanted to make a change to the way people access healthcare, QDoctor provides remote video consultation technology mainly for NHS GPs and also specialist and urgent care services. This has been a key digital service in 2020 to enable the NHS to continue caring for patients while they remain in their own homes, as reflected in patient signup numbers having grown by a factor of 5. In 2021, QDoctor is now running key Covid vaccine booking systems in England and we are looking forward to a rapid rollout. 


At the end of March, we led a $10M total investment round, of which Nesta invested $1.3M, in BibliU, a digital platform providing digital textbooks and data analytics to universities and colleges. A recent survey found that 65% of higher ed students skip buying print textbooks due to cost. BibliU helps to make textbooks more affordable by working with publishers to provide the content students need via its digital Learning Enablement platform.  Reflecting themes in Nesta’s Fairer Start Mission, BibliU’s Universal Learning model enables institutions to give all students first day access to their books. We have seen a surge in UK and US universities signing up to the platform and BibliU’s revenue has more than tripled since our investment, with more than 125K users.


In mid April, Nesta invested £750k in science education company Empiribox alongside another £750k of new capital from existing investors Downing Ventures, to support the company in improving the teaching of primary school science (KS1 and KS2). Empiribox offers science experiment kits  as well as teacher training and pupil assessment. This makes it possible for non-Science trained primary school teachers (>70% in the UK) to gain knowledge and the confidence to teach science to their pupils. During the year, our investment was used to develop and launch a new online platform, “Empiribox@home ” which has helped more than 3000 schools enable pupils to continue their science education via remote learning during lockdown.


Job matching and recruitment service platform for those at the start of their career, GetMyFirstJob, saw enhanced support from Nesta this year, both in terms of a follow on investment in April and close collaboration with Nesta’s Sustainable Future Mission team, FutureFit and IGL. Given the prospect of escalating unemployment (particularly for those aged 16-24), services such as GetMyFirstJob are crucial to help young people find the right jobs or training opportunities. We helped to establish a multi-disciplinary team across Nesta to partner with GetMyFirstJob and improve the way they use their data and have more impact. As the UK shifts its focus toward a green recovery, it’s vital more people are skilled and able to get green jobs and move into the green sector. Colleagues from across Nesta have collaborated to test and trial engagement between young job seekers and “green jobs” advertised by major companies such as Hitachi Rail and WSP Global. 


One of our legacy technology venture investments, Skimlinks, was sold to a retail marketing platform in May, delivering Nesta almost 3x our investment value. Skimlinks’ technology automatically monetizes product links in commerce-related content, a tool to automate affiliate marketing. The company serves major publishing houses and content generators. This is an investment we have held since Nesta invested in purely commercial technology startups back in 2009 and demonstrates the need for patient capital in scaling up innovation.


In July, Nesta invested £750K alongside Hoxton Ventures, in Skin Analytics, which has developed an AI diagnostic tool to detect skin cancer. The technology can identify skin cancers, to the same level as a dermatologist and, as a consequence, will reduce the burden on primary care and GPs who are typically first port of call for skin concerns. With the NHS overwhelmed by Covid, cancer diagnoses are being delayed. Tools like Skin Analytics can efficiently clear the backload of cases, identify  those patients who are at real risk and get them access to specialist care quickly. Quick diagnoses can have a significant impact on reducing mortality from skin cancer. 


Third Space Learning (TSL) provides maths tutoring online, particularly targeting disadvantaged children who are falling behind. The company had grown to serve c.20K children about two thirds of whom were on free school meals. During 2020, TSL bid  in the open competition to deliver the National Tutoring Programme (NTP) and is now supporting a rapidly growing cohort of schools and students.  Nesta has continued to support TSL this year, providing follow-on investment  in October to support its rapid growth. TSL has performed impressively during the year and over time, reaching nearly 70,000 pupils with 1-1 maths tuition since 2013 and demonstrating continued potential for growth and impact.


Arbor Education is a Schools Management Information Systems SAAS platform developed to help schools more effectively use data. There is strong evidence that schools making better use of data in decision making deliver more effective educational outcomes. Arbor has continued through the year as the most successful challenger to the legacy monopoly platform Capita SIMS. In December, Nesta supported Arbor in its merger with  The Key, the UK’s leading provider of governance support services for schools, bringing access to 16,000 school leaders and governors. The deal marks an exciting development for Arbor and helps consolidate The Key as a major force in the UK education services market.  


Over the Christmas break we finalised a follow on investment in ProFinda,  a product that uses advanced data analytics for skills matching. It has a broad range of applications and is used by the big consultancies for internal knowledge management, recruitment and staffing, and learning and development. It is a crucial piece of infrastructure for embedding Diversity and Inclusion inside large organisations, by making internal staffing decisions on a much more transparent basis and facilitating best practice, such as blind search. Nesta will be using Profinda ourselves, to make the amazing range of skills and knowledge across the organisation more accessible, and enable more cross team exchange. 


Oomph was set up in 2011 to provide exercise classes and other activities in care homes. Nesta first invested in 2013 to support the growth of the business and again in 2016 to expand into taking care home residents out on day trips. As Covid took hold, the care home industry has been battered on all fronts and the future looked pretty bleak for all players in the elderly care sector. However, demonstrating  agility, resilience and creativity the company acted early and decisively to reinvent Oomph’s business model. It has now launched Oomph On Demand, a range of online classes for care home residents and training for care home workers which have been received enthusiastically by the care home sector and set Oomph on a more positive footing into 2021.


During the year we have actively supported our legacy technology ventures portfolio with follow-on funding to Symetrica , a market leading civil defence company, eoSemi, assisting energy efficiency in electronic devices by developing next generation frequency control devices for integrated circuits and Smart Surgical Appliances, developing a next generation surgical imaging system to minimise risk in and increase the scope for minimally invasive surgery which in turn should improve clinical outcomes and reduce NHS workload. We have seen the rapidly climbing value of a key remaining asset, Featurespace, which works at the forefront of application of AI to reduce financial fraud, ranked as one of the UK’s fastest growing tech companies. 


We have seen creative and resourceful responses to the Covid crisis in our mission-related fund investments, such as the Pay It Forward campaign run by Crowdfunder enabling >£100m of donations to help organisations rebuild and recover, Big Issue Invest’s role in delivering the Resilience and Recovery Loan fund providing financial support packages for social sector organisations and Bethnal Green Ventures re-orienting their Tech for Good accelerator to help startups that will build back better post pandemic. 


What a year 2020 was! But despite the bleak backdrop we have been energised by the companies we work with and their relentless focus on growth and impact. We have started 2021 with enthusiasm and optimism to see further growth and creativity in the portfolio and to continue to support the inspiring innovators who deliver both social/environmental impact and commercial success. 


Nesta supports Female Founders Office Hours to improve access to funding and support

Lisa Barclay, Investment Director
I am going to be participating in my third Female Founders Office Hours in a couple of weeks and wanted to share the concept. Playfair Capital and Tech Nation have done a tremendous job in pulling together dozens of VC investors over the past year and connecting hundreds of female founders to them. The main aim of the events are to address some systemic failures – a lack of funding and support for female founders in tech and barriers to accessing investors, particularly outside of London.
During Female Founders Office Hours, each founder is matched with 4 investors with whom they have 1-1 sessions to pitch their startup, ask for advice, or use in whichever way is going to be most helpful to them. As an investor, it is inspirational to meet each founder, hear their story and support them. In the UK, for every £1 of VC capital, less than 1p goes to all female founding teams and 10p goes to mixed gender founding teams.  These are woeful stats which need to change and all credit to Playfair Capital and Tech Nation for bringing together the industry to collaborate in driving change. You can read the blog introducing Nesta Impact Investments as well as some of the other VCs who will be taking part in the November Female Founders Office Hours. Look out for future events and if you are a female founder please do sign up on the Playfair Capital website.

Nesta’s experiences of investing in technology ventures

In a previous blog I provided an overview of Nesta’s first investment phase. In this post I aim to cover the period 2007-2012 when Nesta was actively investing in UK technology companies, with a particular focus upon medical technology, ICT and engineering/cleantech businesses.

Having emerged from the ‘seed’ investing phase with a portfolio of over 200 direct investments, a decision had to be made about how to focus Nesta’s strategy to create a more manageable portfolio and also to increase chances of financial success by building expertise around the core investment themes. At this stage Nesta was still a quango rather than a charity, and the focus shifted from general start-up support to fostering new technologies to power the next generation of the UK technology sector. This shift in strategy was made as the general availability of start-up capital was beginning to improve, following the long funding hangover from the tech crash of 2000.  Doing this well required us to make fewer, larger investments and to build more active relationships with those investees, in line with venture capital investing models.

Balancing our portfolio

Prior to launching this new investment activity in 2007, a review of the existing portfolio took place which concluded that of the 212 seed investments, 41 fitted within the new scope and would be transferred across to the new ‘Technology Venture’ investment activity. The remaining 171 investments were deprioritised and a decision made to reactively manage these assets through to conclusion (i.e. repayment, exit, wind-up, expiry of royalty arrangements), with no further capital being made available by Nesta to these companies.

Our ‘Technology Venture’ portfolio was initially made up of:

  • 17 were medtech or life science companies
  • 17 engineering or clean technology companies
  • 7 digital businesses

Nesta had invested £6.7milllion into these 41 companies prior to the transfer. Over the course of the next 5 years, Nesta added another 19 companies to this portfolio, of which 9 were ‘digital / ICT’ companies, 6 medtech and 4 engineering, creating a relatively balanced portfolio across the three focus sectors.

At around the same time, Nesta lobbied and succeeded in obtaining an exemption from certain EU state aid laws affecting investments by government backed entities. This was an important development as it removed some of the restrictions which impinged on Nesta’s ability to build meaningful stakes in portfolio companies (e.g. total investment limits, private sector match funding). Added to this, Nesta’s trustees committed to invest up to 10% of Nesta’s endowment (i.e. c.£30million in 2007) into this Technology Venture portfolio, as part of its ‘high risk’ asset allocation.

Building on our experience

Since 2007, Nesta has invested an additional £10million in follow-on funding to the original 41 portfolio companies. On top of this, we have invested £16.7million into the 19 ‘new’ portfolio companies, bringing total invested across the portfolio of 60 to £32.9million. Results to-date from this activity (as of 31/3/2020):

Portfolio Invested Realisations Active companies Holding value Total Value versus Cost
Original portfolio 41 £16.4m £4.8m 11 £4.1m (£7.5m)
New portfolio 19 £16.7m £8.7m 7 £13.0m £5.0m
Total 60 £33.1m £13.5m 18 £17.1m (£2.5m)


It is interesting to observe that of the 18 active companies remaining in the portfolio, with a total holding valuation of £17.1million, 4 companies contribute £15.6million to this valuation, 7 contribute £1.5million and 7 are written off (i.e. we have valued at £0). This level of ‘value concentration’ is common in later stage portfolios as the more successful companies start to emerge.

It should be noted at this point that it is extremely difficult to value private businesses, as there is no daily listed share price or readily comparable companies to measure yourself against. Hence, the valuations we hold for our portfolio companies are based on the pricing by third parties in previous investment rounds, which tends to be a conservative basis for valuing a business. We hope (and believe) that we will generate more than £17.1million from the remaining portfolio, although predicting the timing and value of each exit is an imprecise science.

12 years after refocusing our investment activity towards early stage technology venture investing, we continue to provide follow-on capital, although on an increasingly selective basis. Of the remaining portfolio, we are bullish on the potential of Featurespace, Symetrica and Skimlinks to fulfil their commercial promise and deliver strong returns. Additionally, we are hopeful that some of our portfolio companies working on step-change technologies, for example eoSemi, Camfridge, DesignLED, Smart Surgical Appliances, CellCentric and Surface Generation will deliver commercial value from their technological promise.

Biggest realised ‘win’ – £4.9m realised from Sirigen (£1.25m invested).

Biggest money multiple return – 23x return from Cobalt Light Systems (£25k invested)

Biggest realised ‘loss’ – Gnodal £2.2m invested, £0 returned.

Some lessons /reflections:

  1. Hardware is hard!

We experienced several late stage and/or expensive failures in companies developing hardware for health, engineering or ICT applications, for example Cellnovo, Veryan, Gnodal, Light Blue Optics. These businesses, and others, raised significant amounts of investment to develop and commercialise innovative hardware propositions, but ultimately found that either the technology did not work to the required standard or that the market had moved on.

  1. Software is easier, but it’s a relentless quest for refinement and improvement.

Several of our remaining portfolio companies are software based and are starting to see strong commercial traction (including Skimlinks which was sold in May 2020 and which is not reflected in the portfolio figures above). All these companies have pivoted (i.e. changed their commercial proposition) at least once, but unlike hardware businesses, this can be done relatively cheaply and quickly. The predominance of venture capital investment into software companies is testament to the relatively easier journey such companies take to discover whether they will be a commercial success.

  1. It’s a long journey!

As can be evidenced from our own experiences, and that of the venture capital funds that Nesta has backed, investing in early stage technology businesses is a long and potentially financially arduous journey. Whilst our shortest ‘hold period’ (i.e. the time between first investment and an exit) is 2.5 years, the average across our portfolio is 9 years, and in the remaining portfolio, there are several companies where Nesta first invested pre-2005.

  1. The rewards are rewarding!

Whilst the journey may be long with an uncertain outcome, Nesta continues to provide investment to innovative companies seeking to make positive contributions to the world. The financial rewards for doing it well can be significant, but as important to Nesta are the ripple of positive effects that commercial success has on the innovation ecosystem that is seeking to positively disrupt the status quo.

In the next blog, I will cover Nesta’s investment experiences from becoming a charitable foundation in 2012, since when all new investments have been viewed through the additional lens of their contribution (or ‘impact’) to specific social outcomes.