2022 report: The UK tech ecosystem in review
3 min read
Tech City UK and innogy’s UK Innovation Hub have recently run an online survey and subsequently released the Innovation report 2017 , which explores the various investment needs of start ups. The results showed that the most important factor for companies considering raising external investment was personal chemistry and trust with the investor.
The UK Innovation Hub, a new startup programme from innogy the Germany-based energy company, is focused on investing in early-stage startups. Together with Tech City UK, the survey highlights what UK startups really want, creating its own Hierarchy of Needs. Key findings included:
– The majority of aspiring founders would turn to angel investors (66 per cent) or VC’s (54 per cent).
– Only 4 per cent would consider a P2P loan and 14 per cent would consider a bank loan.
– 43 per cent would turn to a strategic investor and 39 per cent would consider an accelerator programme.
– Customer acquisition (27 per cent) and product development (26 per cent) were the two key stand out uses of investment, followed by talent (19 per cent).
– Programming skills are in demand. Front end and back end developers are the most challenging hires for new businesses (47 per cent).
– This was followed by other product related roles, UI/UX designer (29 per cent), mobile applications developer (24 per cent) and product (24 per cent).
–63 per cent use word of mouth to find out about investors
–A majority rely on Angel List (57 per cent) TechCrunch (51 per cent) and Crunchbase (50 per cent)
–Two topics hold particular appeal for founders – learning more about other startups in their space (68 per cent) and information on new funds (65 per cent).
–Advice from investors is also of interest to a majority of founders (57 per cent).
–Legal information was the topic of the least interest (20 per cent).
The survey of 164 startup companies across the UK took place from January until March 2017. Of the respondents, three-quarters have global ambitions, while 44 per cent believe they have the potential to become a billion dollar company.
While the startups were bullish about their growth ambitions, over two-thirds were pre-revenue in the last financial year. 36 per cent have already raised funding, with a majority funded by family and friends or a pre-seed programme. Only 9 per cent of funded businesses had received a Series A equivalent investment.
Tech City UK and the UK Innovation Lab worked in close partnership both to develop an online survey that was attuned to the needs of startups, and in the subsequent analysis and reporting of the data collected.
The research itself was conducted by Tech City UK, kindly supported by 500 startups and Seedcamp, who assisted with the distribution of the questionnaire to UK founders and aspiring founders
Thomas Birr, SVP, Innovation & Business Transformation at Innogy, commented: “With a huge array of different startup programmes and investment options available, we wanted to get to the heart of what really matters to Founders when considering funding. With the majority looking to Angels and VC’s for funding, and just over two-fifths looking to accelerator programmes, finding someone they liked or trusted with an understanding of their product and vision, was incredibly important. Access to further funding and a great track record were also key considerations, while the add-ons many programmes provide – such as free office space and pitch training – were a low priority.”
Gerard Grech, CEO of Tech City UK, added: “ As the UK’s digital startups have continued to develop over the past decade, we’ve seen a huge support network of investors develop alongside them. From crowdfunding to accelerators, and angels to large VC’s, there is a huge array of options out there for Founders to consider. Our Future Fifty, Upscale and Northern Star programmes are filled with role models for these early-stage Founders to look to. It’s no surprise that this survey has highlighted the global ambitions of our next generation of companies, who have developed in the shadow of some of the UK’s leading unicorns. It’s reassuring to see that with so many options before them, they consider personal relationships, trust and previous success to be key when considering an investor.”
Tech City UK’s Tech Nation 2017 survey found that just over half (51 per cent) of business founders or CEOs cited lack of supply of skilled workers as a challenge, whilst just over two-fifths (42 per cent) mentioned access to finance. In this survey, however, access to capital emerges as the number one growth challenge for entrepreneurs and aspiring entrepreneurs.
Nine in ten say this is a challenge, some way ahead of marketing, sales and access to talent. With the majority of survey participants being early stage businesses where they perform all the important tasks with the help of a small team, cash flow and sales are pivotal, while the challenges of growing a larger team are some way off.
Carlos Espinal, Partner at Seedcamp, commented: “At Seedcamp, we’ve been supporting European entrepreneurial talent for the past ten years through our community of support, global network of reach and efficient access to capital. We know how critical it is to build a strong and functional relationship between investor and founder at the earliest stage and are proud to have supported over 250 companies who’ve gone on to raise significant follow-on funding and scale valuable global businesses.”
“When looking for investment, it’s critical to identify your point of need (in excess of capital) and ensure the investor or fund you’re approaching is the right fit; they understand your stage of development, invest at the right stage for you and have a proven background to support you. We are incredibly proud to have built strong relationships with the founders we’ve backed over the past ten years and in a time of crisis or when looking for advice or counsel, our founders know they can talk openly with us. It’s certainly not a case of investor injects capital and then the relationship ends. It’s critical that both founder and investor feel they have a fair deal that will allow them to work together for a long time after the investment is complete.”
Matt Lerner, Venture Partner at 500 Startups, added:“These founders are dead-on. Taking money from a VC is like a ten-year marriage. It really has to come down to trust and chemistry. That’s why it’s great to reference check your VCs before you take their money. My old roommate used to say ‘I only trust God and my Mom. And with my Mom, I cut the cards.’”