Posted on July 31, 2017 by staff

Even unicorns were start-ups once


Start-ups are the lifeblood of the tech ecosystem. We have seen great successes in the North region for start-ups and a tremendous amount of activity.

From the university spin-outs through to the teams who meet at larger businesses and have that seminal idea or inspiration, they are critical. Every business in the world was a start-up once upon a time.

We know that there are start-up stories out there which are immensely inspirational. Household unicorn names like Skyscanner, and Anaplan are all 21st Century businesses.  None existed before 2000.

Today, scale-ups like Hedgehog Lab, Gnatta and Infinity Works were all non-existent not long ago, but between them employ well over 300 people today.

In my last article, I talked about the rise of the unicorns and how quickly (or otherwise) businesses get there – the current world record being held by enterprise messaging platform Slack – eight months from start-up.

But questions I get asked a lot are – is it more difficult to found a start-up in the regions of the UK? Should start-ups focus on London, or maybe Silicon Valley?

If the founder is prepared to put all else aside in pursuit of his or her dream, then the answer is simple. Where is the market, where is the talent and where is the capital?  Go to where you can fulfil as many of those answers as possible.

I often meet founders who have a ‘unique’ offer in the regions in the UK, or even in London, who think that that qualifies them for success on an international scale. How many times have we heard “if I could just get 1 per cent of the USA market…”

Think on this: if someone came to Manchester with a story that they had a really really successful business operating in Ecuador, Chad, Zimbabwe or Senegal, how seriously would they be taken?

But with around 14 million population in these countries, that’s the same as a UK business going to America and saying the same thing, population adjusted.

I appreciate there are cultural and other differences at play here, but you get the point. Big markets and big economies do mean big opportunity, but in equal measure they are competitive so assembling the team, the capital and the plan to get credibility and momentum is critical.

Some of the important success factors to a start-up are things like capability and credibility of senior team, uniqueness of product and real differentiators, barriers to uses and also funding. If you haven’t been there before and got the t-shirt, find a mentor who has and get him or her on your board.

The ingredients are all there for the UK. According to the 2017 Tech Nation report, there are eight of Europe’s top 20 universities right here in the UK.  That’s more than any other European country.

The talent is out there. And while it is very London focused, in 2016 there was 50 per cent more digital tech investment in the UK than any other European country.  In Manchester alone in 2016, there were almost 900 start-up births.  In Leeds that figure was 314, in Newcastle 211 and so on.

It’s the funding point where the regional differences across the UK are perhaps the most stark. KPMG runs quarterly research showing the amount of investment into early stage tech businesses across the North.

It’s always dangerous to generalise but in the Northern region, you can count on around £30-40m being invested into 30-40 businesses a quarter – mostly start-up or scale-ups.

Is this good or bad? In the context of the Northern Powerhouse economy this feels small.  In fact, the same data for London shows roughly £250m per quarter in around 300 transactions.

But there are green shoots. In the first quarter of 2017, there was over £150m raised in investment transactions across the North.  Admittedly, the £83m raised by Atom Bank of Durham does distort the figures, but even after removing this ‘outlier’ there are signs of real progress and adding to this the launch of Accelerated Digital Ventures, the funding platform focused on the regions and run by our very own Lee Strafford, we can see there’s hope for funding for start-ups in the road ahead.

In today’s hyper-connected world, where innovation and disruption are key to preserving our economy’s competitive advantage, it’s vitally important that start-ups are given the bandwidth and help they need to be successful on an international stage.