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UK Startups and Innovation
13APR

Innovate UK adopts DARPA-style portfolio model

3 min read
17:59UTC

Open-competition grants give way to a portfolio management approach. The Velocity programme will scout and back deep-tech companies across six sectors. The ambition is DARPA; the budget is a third of it.

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TechnologyDeveloping
Key takeaway

Innovate UK wants DARPA's model on a budget roughly one-third of DARPA's size.

Innovate UK published a new prospectus in April 2026 replacing open-competition grant programmes with a portfolio management model 1. The Velocity programme offers ongoing relationship-based account management instead of fixed-term grants. Growth Sector Teams will actively scout and back high-potential deep-tech businesses across six priority areas: advanced manufacturing, clean energy, creative industries, defence, life sciences, and digital technology.

A new High Potential Business Framework evaluates companies on four criteria: team capability, technical breakthrough, talent pipeline, and market readiness. The model is explicitly DARPA-like: proactive identification and sustained backing rather than reactive competitions.

The budget does not match the ambition. DARPA's 2025 budget was approximately $3.7bn (roughly £2.9bn). Innovate UK's total annual budget is approximately £1bn, of which innovation grant programmes are a fraction. DARPA's power comes from absolute scale: it can back 50 speculative projects knowing most will fail. Innovate UK's increased selectivity without a proportional budget rise means the same money reaches fewer companies. Active competitions in April 2026 include Battery Innovation (£25m), Robotics and Autonomous Systems (£38m, DSIT-backed), and Frontier AI Discovery (£2.5m). Companies excluded from the Velocity portfolio have fewer fallback options than under the old regime.

Deep Analysis

In plain English

Innovate UK is the government's main funding agency for technology companies. Until now, it ran open competitions: any eligible company could apply, the best proposals won grants. From 2026, it is changing to a different approach, more like a venture capital fund: it will proactively seek out the companies it thinks are most promising and offer them sustained support, rather than waiting for applications. The model is inspired by DARPA, the US defence research agency that funded early-stage versions of the internet, GPS, and stealth technology. The ambition is to be more strategic. The concern is that DARPA has a budget of £2.9bn per year; Innovate UK has about £1bn for everything, with grants only a portion of that.

Deep Analysis
Root Causes

The Innovate UK model shift reflects accumulated evidence that open competition grants systematically favour companies with the capacity to write high-quality grant applications rather than companies with the highest technical potential.

Large companies and universities with dedicated grants teams consistently outperform smaller startups in competitive grant processes, even when the smaller startups have superior technology. The portfolio model is partly intended to correct for application-quality bias.

A secondary cause is UKRI's organisational structure. Innovate UK sits within UKRI alongside seven research councils. Competition for UKRI's central budget means Innovate UK's operational model must be justifiable to a UKRI board primarily oriented toward academic research output metrics rather than commercial technology deployment.

The shift to a portfolio model with portfolio membership and relationship management creates a differentiated accountability framework that may be more defensible within UKRI's governance.

What could happen next?
  • Risk

    Companies outside Innovate UK's portfolio network lose access to their primary public funding channel as open competitions shrink, concentrating public support in a smaller number of pre-selected companies.

  • Consequence

    ARIA and Innovate UK Velocity now overlap in remit; without clarification from DSIT, companies may face competing application processes for similar mandates.

Sources:Innovate UK / UKRI
Mentions:Innovate UK →UKRI →Innovate UK Velocity programme →Prima →Japan →DSIT →
First Reported In

Update #1 · State capital floods in, seed money drains

Innovate UK / UKRI· 13 Apr 2026
Read original →
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