Aguila Co-Founder Luke Chesworth explores the implications of the deep tech revolution for risk, insurance and the UK’s “technological sovereignty”.
For decades, the “tech” in “UK tech” largely referred to software, fintech apps, and SaaS. But a tectonic shift is occurring. The spotlight has moved from the application layer down to the metal. Compute, the raw physical power required to process data and run AI, is now the most strategic resource on the planet.
The UK is in a prime position to seize this opportunity, and the British government has now made its first investments under the £500m ($675m) Sovereign AI fund, aimed at accelerating the commercial growth of domestic AI companies.
As an observer in the insurance and risk space, I see this shift as a matter of national resilience. If we don’t build our own compute capabilities, we remain digital tenants of overseas “Big Tech” landlords.
But leadership in this space depends on more than capital. It requires infrastructure, talent, and critically, a risk ecosystem capable of supporting deeptech innovation. Insurance has a key role alongside government, venture capital and academia, in enabling the risk-taking that innovation demands.
What exactly is ‘compute’?
In the simplest terms, compute is the engine room of the modern economy. It’s the combination of processors (CPUs and GPUs), memory, and the networking infrastructure that allows them to “talk” to each other at lightning speed.
If data is the new oil, compute is the refinery. Without it, the data is just crude, unprocessed and useless.
Why is it ‘hot’ right now?
Two converging forces have made compute a critical bottleneck that makes new compute architectures essential:
- The AI Explosion: Training a modern AI model requires billions of calculations per second. Traditional hardware is struggling to keep up with this exponential demand.
- The Death of Moore’s Law: For 50 years, we relied on the fact that transistors would get smaller and cheaper every two years. We’ve now reached the physical limits of silicon. To get more power, we can’t just shrink things anymore; we have to reinvent how computers actually work.
The UK’s structural advantage
The UK is unusually well positioned to respond. Its universities – particularly Oxford, Cambridge, Imperial, and UCL – are global leaders in deep scientific research. This academic strength underpins a growing ecosystem of startups tackling compute challenges at a fundamental level.
Unlike the software era, deeptech demands scientific depth and long-term thinking. Founders and investors increasingly recognise that the next generation of breakthrough companies will combine hardware and software to overcome physical limitations.
Several UK startups illustrate this shift. Nu-Quantum is addressing scalability in quantum computing by developing networking systems that connect quantum processors. Wave Photonics is advancing silicon photonics, using light instead of electricity to move data more efficiently. Nscale is building high-performance GPU infrastructure tailored for AI workloads, ensuring UK companies have domestic access to compute power.
What happens if we win?
The benefits of building a sovereign compute ecosystem could be transformative.
- Drug discovery could accelerate dramatically, with simulations reducing timelines from decades to weeks.
- Energy-efficient computing could support Net Zero goals by cutting the power consumption of data centres.
- Technological sovereignty would protect critical sectors – healthcare, finance, and national security – from external dependencies.
The roadblocks ahead
Success isn’t guaranteed. We face three major hurdles:
- The “scale-up gap” remains a persistent issue: while early-stage innovation thrives, later-stage companies often relocate overseas to access larger pools of capital.
- Infrastructure is another constraint. Advanced compute requires vast amounts of energy, demanding an affordable and available supply, which is a particular challenge for the UK.
- A third, less visible challenge lies in risk management.
The changing nature of risk
The transition from software to deeptech fundamentally alters the risk landscape. As AI-driven medical innovation and quantum computing scale, the risks facing startups have become more physical, more global, and more complex. This introduces higher costs, longer development timelines, and more uncertain outcomes.
For investors, deeptech can appear daunting. Physics is expensive, and funding rounds of £100m before a finished product are not unusual. Physics-driven innovation means specialised facilities, “clean labs”,advanced materials, and highly skilled talent.
This is where insurance becomes critical. Investors need assurance that risks are understood, quantified, and mitigated. Robust insurance structures and contracts help ringfence financial exposure, making bold investment decisions more viable.
Conclusion: enabling the UK’s deeptech future
The broader ecosystem is beginning to align. Government initiatives are expanding access to compute and capital, Combine this with our world-class incubators and a maturing VC landscape, the pieces are on the board.
But unlocking this opportunity fully requires a parallel evolution in risk support. Insurance must move from a reactive function to a proactive enabler of innovation.
The UK faces a clear choice: participate in the next industrial revolution as a consumer, or shape it as a leader. Achieving the latter depends on enabling calculated risk-taking across the ecosystem.
Aguila specialises in insuring frontier deep tech and life science companies. If you’re looking for an insurance broker that can understand your business and make smart suggestions on how to protect your patents, people, investors and more, please get in touch.