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City analysis: Reading on track to tackle skills and investment challenges

Community, Data & research, Reading, Tech Nation Report 2018, Tech Nation Tour

Kane FultonKane Fulton, July 19, 2018

As Tech Nation on Tour comes to Reading, we’ve heard from a panel of local figureheads about the issues affecting the Thames Valley region’s tech ecosystem.

Finding the skills to scale

Reading has the ambition to build on its position as the UK’s third largest tech cluster (in terms of turnover generated, which was £13.6bn in 2017 according to Tech Nation Report 2018) – but it must shout louder about its achievements and overcome key challenges first.

That was the view of the panel, which said that skills, availability of coworking and office space, and access to funding were three top challenges for tech businesses in the region. We were encouraged by one panelist to view the so-called digital ‘skills gap’, which was cited as the biggest constraint facing scaleup companies there, as an opportunity for change.

It was suggested that universities in the region could collaborate more closely with tech companies to shape coding and other courses to reduce a “disconnect” between academia and the business world.  One panelist called for closer alignment of national digital and creative skills strategies to ensure that people with talents beyond coding move into emerging sectors such as AI.

There’s no shortage of large tech companies in Reading, which is a long established home to Microsoft, Oracle, Cisco, Huawei and Symantec. One panelist said that their presence presents an opportunity for startups who, despite not being able to pay similar wages, should attempt to lure skilled and experienced workers in the region looking for a change of pace with the promise of exciting projects and an opportunity to exert influence.

Louize Clarke, Director of ConnectTVT, said:

“We have a real skills gap and I don’t see it being solved right now. My slight concern with UTCs is that they’re funded by vendors and have narrow skill sets. And I see nothing being done in terms of creative people. If AI is our future, we need empathetic people and to put investment into creative people like me; I’ve been in tech for 24 years and have never learned to code, but I think I could be quite good in the AI world. Also, can we stop banging the ‘women in tech’ drum? It’s about diversity and inclusion – women is not the only thing. I think it’s boring and not attractive to the next generation either.”

Adam Hale, Chairman of DevOpsGroup (and former CEO of Fairsail which was acquired by Sage), said:

“At Fairsail, our biggest issue by far was skills and hiring people. Going from 12 people to 300 was non-trivial. Let me give you a stat: in Berkshire, just 170 students out of 8,000 nationally studied A-level computing in 2017. The government could help get 10 times the number of people coming through schools studying computing, because it’s about that ability to code and get interested. Of those 8,000, just 800 were girls – the lowest number studying any A-Level subject. As a father of two daughters, that just breaks my heart – but it’s not a problem, it’s an opportunity that we need to grasp.”

Filling in the blanks

Research by Tech Nation found that the number of digital tech businesses started in Reading climbed 260% between 2006 and 2016. Reading has one of the highest digital densities in the UK, at seven times the UK average.

We heard a call for more efficient use of office accommodation in Reading town centre to support the growth of digital businesses. While there was praise for coworking spaces springing up at grassroots level, such as Grow@GreenPark which was founded by panelist Louize Clarke, most of the panel agreed that more should be done by stakeholders including local government to fill a deluge of empty offices in the city centre.

One panelist said that such offices should be marketed to startups prepared to pay a premium for Reading’s “excellent” transport links, which make it easier to hold meetings with investors, instead of opting for more affordable accommodation at science parks located out-of-town.

Scotland’s tech incubator Codebase, which recently hosted Tech Nation on Tour in Edinburgh, was held up as a successful example of how ‘Grade-A’ office space can help support a scaling community.

Richard Parker, Founder and CEO of Altitude Angel, said:

“We pay approximately five times more to be in a building in Reading’s centre versus being outside of it by about a mile and a half. That costs us about a quarter of a million more pounds a year. Our challenge is that we’re too big for coworking space and way too small for an entire floor of a fantastic office space like this [Thames Tower].”

Adam Hale said:

“In terms of office space, Fairsail was in Davidson House then moved to the Enterprise Centre on the University of Reading’s campus. We went from 10 to 180 people there, and it’s now the largest tenant in the Thames Valley Science Park out by the motorway. There is accommodation and the university was a fantastic and flexible partner for us.”

Creating an investor magnet

One investor on the panel praised the “impressive” number of investment-ready startups in the region. However they said that startups are difficult to find due to being spread out across different locations, and as a result investors from London will struggle to find them unless they make themselves more visible.

We heard that startups in Reading tend not to have difficulty in raising “friends and family”, or angel, investment rounds. The problem, we heard from two panelists, is that they come unstuck when looking to raise more substantial amounts of between £3m and £5m.

The panel was harmonious in calling for a central place to bring investors and startups together. The creation of such a space could help Reading move from being a city that investors pass through, to one that they actively visit to seek out deals, it was suggested. This could lift the burden on startups who regularly find themselves burning through runway by spending money on train tickets to meet investors in the capital.

Helen Milburn, Director of Tech Law at EY, said:

“I think the funding situation in Reading is twofold. There’s no centralised point, which I feel acutely. I have to put real legwork into getting to meet the companies I want to meet, which is why I have Converse trainers in my bag! I don’t experience that when I talk to investors in hubs like Manchester, Newcastle and Edinburgh. What I see in Reading is its companies going into London, and we should be working hard as we can to stop that and make Reading a better destination rather than pass-through transience. You see investors who will say they want to be here and are making inroads into being here – that’s hugely positive.”

Tong Gu, investment lead at ADV, said:

“I’ve reached out to 40 startups since the beginning of the year, but I only found them by looking online. I wouldn’t know where to look for them as they’re all based in different places. I think it’s the same for angels – I’m not personally aware of any active angel groups in Reading.”

Adam Hale said:

“Funding-wise Fairsail raised £16m through angels and growth capital. Honestly? We were deluged with offers of money. In my experience, there’s way more money than opportunity now in tech – there’s a lot of money chasing a relatively small number of firms.”