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How Britain could have invented the iPhone: And how the Quangocracy cocked it up

Inventor screwed - while taxpayers sent a clown on holiday

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Enter Nesta

The UK’s National Lottery was launched in 1994 - five years before Fentem ended his PhD studies in 1999 - to (besides turning a tiny number of ordinary folk into millionaires) pump cash into worthy arts, sports and heritage projects. But the New Labour administration, with which Tony Blair swept to power in 1997, wanted to extend the brief to support innovation and entrepreneurs. Playing venture capitalist wasn’t in the original plan, and required a revision to the Lottery Act in 1998: this created a quango dubbed the National Endowment for Science, Technology and the Arts (Nesta).

Nesta had three grandiose ambitions:

  1. It would “help talented individuals (or groups of such individuals) in the fields of science, technology and the arts to achieve their potential”.
  2. It would help people “to turn inventions or ideas in the fields of science, technology and the arts into products or services which can be effectively exploited; and the rights to which can be adequately protected”.
  3. Thirdly, it had a vague remit of "contributing to public knowledge and appreciation of science, technology and the arts". Which could mean almost anything.

Nesta began life in 1998 with a £250m endowment, using the interest on the sum to fund its activities. Its first chairman was Labour supporter and donor Lord Puttnam of Queensgate.

He was succeeded by top adman Sir Chris Powell, who, as the son of Air Vice-Marshal John Frederick Powell, belongs to one of the most powerful and influential families in British public life. Sir Chris's elder brother Charles, now Baron Powell of Bayswater, was an ambassador and private secretary to Prime Minister Margaret Thatcher. His younger brother Jonathan became Blair’s Chief of Staff in Downing Street, a title created by the incoming premier, granting Jonathan unprecedented power over civil servants. Meanwhile, Sir Chris headed the advertising agency BMP, which was used by Labour from 1972 to 1997.

Today, Nesta is chaired by the controversial Sir John Chisholm, the legendary public-sector corporate raider. Chisholm was chosen in the dying days of the Tory government to organise the selloff of much of the Ministry of Defence’s R&D capability as a private company called QinetiQ – and then became QinetiQ’s head, turning a £129,000 personal investment in the company into a £23m payout.

Fentem submitted a funding application to Nesta in January 2003, while he continued to work on new prototypes.

"When I first approached Nesta I was told that I would receive a funding decision within 6 weeks," he says. "However, it took Nesta a year to just write the contract. To put that in perspective, it took Apple only 2 years to conceive, develop and commercialise the entire iPhone."

'No one at Nesta has a science or engineering background'

It would be many months before the organisation's bureaucracy finished processing his paperwork. Fentem said he had been troubled to learn, that spring, from a manager at the quango that that “no one at Nesta has a science or engineering background”, in the manager’s own words.

“When he saw the look of horror and disbelief on my face he quickly said, ‘But we're trying to remedy that’,” Fentem recalled.

That August, Nesta introduced him to a potential manufacturing partner, but there were more delays – in all, it would be almost a year before a funding deal was signed. On 5 November, Fentem inked a contract with Mark White, Nesta's Invention and Innovation Director. The deal assigned Fentem a mentor, earmarked a manufacturer, and released £20,000 in funding. Another £30,000 could be unlocked later on once further progress was made, as well as £50,000 to develop an initial product.

The contract describes the development of “an innovative touchscreen technology”, specifically a touchscreen that can detect the speed at which one's fingertip moves across the display and can "capture multiple impacts across a surface area" – multitouch, in other words.

“A number of sectors within the music industry would benefit from such a device”, the agreement notes, adding that “the idea has potential uses beyond the music industry and could be developed into mainstream computer hardware”.

But the deal turned out to be pretty one-sided. Fentem explains:

The manufacturing deal "milestone" created something of a chicken and egg impasse; Nesta wouldn't release the funding until the technology was ready for a manufacturing deal. In other words, I was expected to complete development of all of the multi-touch technology with my own savings plus their 20K investment, shouldering most of the project risk - Nesta were mainly exposed to what bankers call "up side" - i.e. they would only "invest" when they were almost guaranteed royalty returns. This is not normal.

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Next page: Send in the Clowns

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