Emerging tech rockets in North West, but Manchester loses ground

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The North West continues to see huge investment in its businesses, with the region attracting £349m in tech VC investment during 2020, according to Tech Nation’s annual report.

However, Manchester has fallen in UK and European standings for tech investment, it also reveals.

The region has established itself as a top performing European tech cluster following five years of bumper investment, including a 277% increase in VC funding in Manchester businesses from 2018 to 2019.

Other highlights of the city’s success over the past 12 months included Manchester-based The Hut Group’s IPO, Europe’s largest ever eCommerce IPO, which raised £1.9bn at a market capitalisation of £5.4bn.

Tech Nation’s 2021 report reveals that, following sustained years of investment in the region, the North West’s tech ecosystem has continued to thrive, creating jobs and economic value for the region.

The region now has 100,000 people employed in digital tech companies, five unicorn tech firms – valued over $1bn – and six future unicorn tech firms, high-performing companies with the prospect of reaching that hallowed billion-dollar valuation, currently valued between $250m and $800m.

These indicators give a strong sense that the underlying conditions required to rapidly scale a tech business, including availability of talent, investment, infrastructure and access to global markets, are present in the North West.

Tanya Grady, head of partnerships at Enterprise City in Manchester, said: “The insights from Tech Nation’s annual report show that the region is continuing to benefit years after the strong antecedent investment.

“As well as headline-hitting VC deals, specialist programmes, such as Exchange at Enterprise City, are doing important work to nurture the region’s cohort of tech start and scale-ups. These initiatives, which support entrepreneurs, help raise funding, and connect business owners with investors and industry experts, will be critical in supporting the North West’s tech start-up economy, and pipeline of tech talent.”

Investment in health tech saw a 262% increase in VC funding in the North West, clocking up the highest increase in emerging health and wellness investment in the region from 2019, from £25m to £82m.

Tanya Grady added: “The success of the North West’s health tech sector makes it clear that the region has the potential to be an incredibly strong tech hub.

“It will be crucial going forwards that North West tech firms are viewing trends and creating products in the new and emerging tech sectors, too, in order to attract more funding and continue to grow the tech ecosystem in the region.”

However, in spite of recent record investment, Manchester is now the UK’s seventh most invested-in hub having lost its top-five position of 2019 to Oxford, Edinburgh and Hull. The decrease in investments in the North West has also caused Manchester to fall out of the top 20 European cities for investment this year.

There are a number of potential reasons for this change, not least the impact of large, late stage deals in a low number of high growth Manchester scaleups in 2019 – including a £100m Series B round raised by Wejo, and £66m late stage VC raised by the Hut Group.

Mo Aldalou, North West entrepreneur engagement manager at Tech Nation, said: “The level of UK tech VC investment is third in the world and hit a record high of $15bn in 2020, which is excellent to see in the face of such a challenging business landscape.

“The North West has continued to thrive in a challenging landscape. Tech entrepreneurs in the North West have raised funding, hired, pivoted, moved premises, trailblazed, gone carbon neutral and more, all in the middle of a global pandemic. There is plenty of talent in the region and I have faith that the North West will continue to thrive.”

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