What is the correlation between financial investment and company growth? Is it ‘better’ to drive growth through revenues or equity investment? What options are available at different stages of growth? What are the regional challenges you might expect to face if you’re raising investment in Bristol or Bath?
These questions have been raised at various points over the last 2 years as I have explored the challenges faced by fast-growth (scaleup) companies in the West of England. Regular readers of my blogs will know that investment has become a strong focus as it is regularly cited as a barrier to growth for companies in the region.
Investment in the West of England – a tale of two halves
We’re in a funny place – Atomicos latest report, the 2019 State of European Tech, suggests a 10x increase in equity investment in Bristol in the last 5 years. We have also celebrated our first 2 unicorns (Graphcore and Ovo Energy) and according to our friends at Beauhurst we have seen 114 companies raise more than £322M in the last 12 months. On that basis, it would be fair to assume that we have this investment challenge sewn up – but in reality, we have a long way to go. These numbers and accolades reflect a few pretty impressive rounds of equity investment and aren’t shared amongst the long-tail of growing companies in the region.
On the ground, day-to-day, the depth of the investment challenge is illustrated by data from the UK Business Angels Association whose last survey suggests 85% of angel investment from ultra-high net worths locally is invested into the Golden Triangle (Cambridge, Oxford, and London for those not in the know). We also only have one formalised angel syndicate in the region – Bristol Private Equity Club (BPEC), which is one more than we had 5 years ago! The group of nearly 90 members have successfully invested a total of £6 million into 19 businesses in the period to September 2019. For now, it’s one group and they are understandably limited by the number of companies they can consider each year.
Outside this group, the angel investor community locally is pretty opaque – investors locally don’t wear a neon flashing sign, or even a word in their Twitter/LinkedIn bio. We’re finding that the founders who have most success either have a wealth of social capital themselves, are very well networked or benefit from connections through one of the many great accelerators, incubators or co-working spaces. Interestingly, with the popularity of Bristol and Bath growing year-on-year, investors that relocate from London or internationally are much happier to label themselves (metaphorically speaking).
Close to London – a blessing and a curse
Founders and business leaders spend up to 70% of their time when raising investment travelling back and forth to London to meet investors. And when they get there, they often encounter challenges that London founders don’t face – investors ask whether the region is an appropriate place to build a company – little do they know that BluWireless, Graphcore, IMDb, Immersive Labs and many more have made their home in the region and successfully build global businesses.
For companies seeking later stage investment, there is a limited selection – Maven Capital, Octopus, BGF, ADV and Deepbridge Capital have local offices and we see an increasing flow of VCs visiting either to participate in pitch events or to visit specific companies on their home turf. Some have even brought their team and spent 72 hours soaking up the Brunel air and enjoying the home of Wallace and Gromit creators Aardman. We’ve seen Plimsoll productions raise £100m through private equity funding recently and Seccl (a Bath-based fintech) acquired by Octopus Investments.
There’s lots going on in the later stage but the supply of capital is such that we’re more dependent on the traditional finance options rather than new-fangled alternative finance. The finance gap where companies feel the real pain is when raising between £250k and £1.5M
Over the last 3 years, a handful of VCs and individuals have suggested that the answer to this challenge should come in the form of a regional investment fund. With a greater supply of capital, surely we could expect to see an even greater business growth rate and productivity improvements. I’ve known of at least 7 different propositions for a new fund – from VCs and from individuals but none have come to fruition, yet. Our neighbours in Wales, Cornwall, the North and in London are well-served with investment funds supported by the Welsh Development Bank and the British Business Bank amongst others.
Time for solutions
There’s one last challenge we face in the West of England when it comes to supporting companies to raise investment: there is no single source of information about who is raising investment. Every corporate advisor, co-working provider and incubator has their own list of who is raising and they have their own network of investors too. This approach means that there is no single source of information for those looking to invest – making their job a little harder, and dependent on being connected to the right network.
It’s this analysis and experience of running the Quarterly Investment Briefing events and Silicon Gorge pitch competitions over the last few years that have led us to develop an innovative new programme: The Investment Activator Programme (or IAP for short). TechSPARK have taken the reigns and convened 8 sponsors across the public and private sectors.
This programme will see us deliver:
- 8 Quarterly Investment Briefing events to help investors network, share experience and learn about the investment opportunities available locally
- 4 Silicon Gorge pitch competitions in the next 2 years to uncover exciting investment opportunities and put them in the spotlight – watch out for the first one which will launch in February 2020.
- 12 events to help build investment readiness and pitching confidence
- A databank of investor info
- A huge number of stories and articles to raise understanding of what investment activity looks like in the region
We hope that this two-year pilot will help us to build the level of investment activity in the region and increase awareness of different investment options for the region’s businesses too. By levelling the playing field for access to investment options, we hope to do our part in creating a fully inclusive ecosystem locally. This programme will also support our friends at other organisations to deliver great investment-related content locally and are looking forward to events run by the UKBAA and BVCA in the new year.
Our Investment Activators
You might be wondering who is going to make all this activity a reality, I feel pretty lucky that I will continue to be involved, largely running the Quarterly Investment Briefing events, and I’ll be joined by the brilliant Abby Frear who has led the Silicon Gorge pitch competitions for TechSPARK for the last few years. Here’s a little bit about each of us in case this is all news to you:
Abby Frear: After a career starting with the Big 4 in London, followed by accounting and recruitment in Sydney, Abby has been involved with TechSPARK since it’s very early days, building partnerships and running Tech events in Bath and Bristol for the last 7 years.
In the last couple of years, she has combined her work running the Silicon Gorge Pitching Competitions with working with some of the brilliant Tech companies in the area, including her current role as Project Manager at Immersive Labs, a Silicon Gorge alumni company, which has recently raised an amazing $40m of Series B investment. Abby is passionate about the South West, and spends much of her spare time in Cornwall & Devon, hiking, camping, and generally enjoying the great outdoors!
Briony Phillips: Briony is Scaleup Lead at Rocketmakers, a software development agency that designs, develops and deploys technology for startups, scaleups and corporations. Briony champions the scale-up business ecosystem and works with partners across the public and private sector to deliver content, events and resources that help to overcome challenges faced by fast-growth companies such as access to investment and office space availability.
Briony’s career has spanned Deloitte Consulting, Teach First, the Open Data Institute and a global construction company in Australia. This ‘stacked portfolio’ approach to her career, which has become known to her as ‘job shopping’ has enabled her to keep her passion for learning and leadership alive. Outside work, Briony has a particular penchant for baking and yoga and is a qualified nutritional therapist.