In the first half of 2021 alone, UK tech startups and scaleups received £13.5 billion of venture capital – more than in Germany, France and Israel combined.
However, with London attracting more than £8bn of this investment, it is evident that the regional inequalities that are driving the UK government’s ‘levelling up’ rhetoric are also present in the tech funding space.
Chancellor Rishi Sunak’s autumn Budget gave tech leaders in the regions a few small wins to cheer, including a pledge to provide £150 million of further funding to support the development of the Regional Angels Programme.
Conceived following the Treasury’s Patient Capital Review in 2017, which concluded that investment was too concentrated in London and the southeast of England, the RAP aims to help reduce regional imbalances in access to early-stage equity finance for smaller businesses across the UK.
The new funding more than doubles the amount of cash available to the scheme.
“This will likely mean investment for hundreds more firms – more than 200 have benefited so far – and tentatively address some of the disparities in the sector,” reflects Piers Dryden, head of technology at law firm Brabners.
“Startups in the regions will undoubtedly welcome the prospect of further investment, but to what extent will this funding tackle the structural problems facing the space – and what more needs to be done?
“While further investment into the Regional Angels Programme will increase the amount of early-stage capital available to entrepreneurs, it’s important that we as a sector seek to address these knowledge gaps and prepare startups appropriately to ensure that the funding is put to the best possible use.
“Only then can the UK’s burgeoning tech clusters play their role in boosting growth and drive regional equality.”
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Brabners recently partnered with Whitecap Consulting for the North West Tech Funding Report, which found that while there are a healthy number of opportunities for startups in the region to raise seed and venture rounds locally, many firms lack the experience – and thus the knowledge – of how to manage the process, leaving them prone to costly mistakes.
“The sheer variety of the types of funding available can often result in businesses accepting offers not best-suited to their ambitions, causing a mismatch in priorities, thus limiting growth potential,” says Dryden. “Similarly, many founders are unaware and unprepared for the time commitment required to raise capital, which meant that their business operations suffered as a result.
“Common pitfalls such as these can easily be avoided through education – but without the structure in place to provide this education, then regions such as the North West will struggle to develop at the same pace as more developed regions such as London and the South East.”