Is there a North/South divide when it comes to funding?

Access to funding is often highlighted as one of the key obstacles facing start up or growing tech companies – with a widespread belief that businesses in the north suffer compared to their counterparts in the south east.

However, Philip Hargreaves at the GC Business Growth Hub paints a different picture when it comes to his view of the funding landscape and the North-South divide.

Head of access to finance at the organisation, he says: “There is a growing funding eco-structure in the north and this is helping to fuel growth across a range of sectors, including tech. It’s often a case of knowing where to look.”

Hargreaves points to the British Business Bank’s Northern Powerhouse Investment Fund and the £400m it has available to support northern businesses.

He adds: “There is also a range of local angel networks and smaller VCs – encouraging signs that the north is starting to fund its growing tech culture.

“The Growth Company, part of the Greater Manchester Combined Authority, provides a range of support to the tech community.”

They include the  ‘Access to Finance’ service providing hands on support and guidance to entrepreneurs on how to access funding for growth as well as its business angels programme, GC Angels.

Then there is and Business Finance’s new-to-market fund, GM Co-Investment Fund, which Hargreaves says, “Is designed specifically to invest in early stage tech businesses within Greater Manchester.”

However, there are still challenges. Peter Lusty, chief executive of Manchester Tech Trust, adds: “Where there is a gap still is in early stage investment.”

He adds: “One of the things we have been working on is putting together a group of high net worth people we know, developing a small group of angels looking to start funding some things.”

Graham Pearce leads KPMG’s technology, media and telecommunications sector business in the North.

He says: “The sector is on the up by pretty much every measure. People are increasingly realising that the sector will be a key part of Britain’s future economic strength.

“And in the north we have some key strengths. If you look at Manchester, there’s the very visible media sector around Salford and MediaCity.”

“Across the north we have different strengths in different cities and businesses doing some great stuff.”

“We have some fantastic universities. Manchester has Europe’s biggest student population.”

What he would like to see is more public and private sector collaboration, pointing that in Silicon Valley it is hard to tell local councillors and entrepreneurs apart.

“They all sing off the same hymn sheet, they are all in it to create value together. We have got to get to that seamless approach. “

Pearce sees future growth in the areas of Virtual and Augmented Reality.  Rob Sethna, digital, creative and tech coach at GC Business Growth Hub, agrees.

He says: “Growth is likely to come from application of developing AR and VR techniques, particularly when linked to strong commercial models to aid implementation and accessibility for clients.

“I’d also predict that agile agencies that understand and leverage inventive and innovative service-led structures will lead the way, enhancing relationships with their clients and providing differentiation from the competition.

“It will also come from organisations understanding and revisiting their approach to quality, thinking about that ‘Big Idea’ value-added sell.”

Hugh Campbell, managing partner of technology advisory and investment firm GP Bullhound, points to the region’s strength in depth.

He says: “We have seen the northern region’s technology sector grow extensively as local businesses are scaling to reach the global market.”

Campbell also talks about to potential of many businesses based here to become international tech giants, adding:  “We expect to see many more local companies with great ideas grow to reach the global technology landscape.”

Paul Mann is a partner in Squire Patton Boggs’ corporate team based in the north and also heads its UK private equity team. He says recent large-scale deals show the strength of the sector across the whole and adds: “It is a really positive time.”

He says: “There is an enormous amount going on the Northern tech scene. There is a huge amount of opportunity.”

Manna says that specialist tech funders have found a gap in the market and that is helping to improve the funding landscape.

Though he adds it can still be challenging, especially for early-stage businesses. He says: “It’s about being aware of what is out there and that is often a challenge for people.”

Investment hits record levels

Investment in Northern technology businesses hit the £525m mark last year compared to around £465m in 2016, according to recent research.

This was mostly down to a jump in the average size of investment, which doubled from around £1.5m to £3m between 2016 and 2017.

KPMG’s Northern Tech Investment Report revealed that almost 48 per cent of businesses invested in in the fourth quarter of the year were developing software-related products.

The reported added: “Investors clearly see value in tech hardware and the ever evolving Internet of Things, as well as the UK telecoms network, which continues to grow as the government seeks to reach local full fibre network coverage in 95 per cent of the UK.”