It’s about time investors paid attention to the ‘north’ of Britain

London and the southeast of England have always been a proverbial tractor beam with regard to venture capital (VC) investment in startups. 

Billions have poured into firms based in Oxford, Cambridge, and the capital in recent years while firms in other major cities have been forced to contend with a slower stream of funding in hopes that a ‘trickle down effect’ may one day benefit them. 80% of all UK VC funding has been absorbed by firms operating in the ‘Golden Triangle’, to be precise, highlighting a serious disparity in the allocation of funds across the country. 

It’s not just about funding, either, it’s about awareness. From a founders’ perspective, it must be tedious seeing top startups to watch roundups being utterly saturated with firms from the Golden Triangle. Are there no exciting, high-growth firms outside the region, or are journalists just stuck in the same ecochamber as their VC friends?

Now, that’s not to say that these startups don’t deserve it. The region is undoubtedly an economic powerhouse, produced a myriad of high-performing global companies, and has played a key role in helping the UK establish itself as a leading global tech hub. But if the UK has ambitions to retain its crown as the third-best performing tech industry in the world behind China and the US, then a redistribution of wealth appears drastically needed. 

There’s light on the horizon for Northern startups

Recent events show the tide could be turning and that a more concerted effort to champion regional tech startups is dawning. Better still, it’s more than just pandering to regional communities with empty promises – there’s going to be serious cash flowing into startups across the north of England and Scotland. 

Edinburgh-based venture capital firm, Par Equity, announced a new £100 million fund to support startups in the north of the country this week. The ambitious fund aims to support and nurture early-stage startups in the north and Scotland. This should be lauded from the rafters as far as UK startup support goes. Creating opportunities for high-growth potential firms and entrepreneurs in the north of the country could go a long way to bridging what has been a long-running gap. 

London-based startups receive eight times more in early-stage investment compared to their counterparts across the UK, according to the Startups 100 Index. Tech Nation rightly flagged the lingering issue of regional funding disparities before its untimely demise, suggesting that the lack of access to cash for founders outside London and the Southeast was a serious challenge for the broader UK tech industry.

Par Equity may not immediately put a dent in this, but the mere fact it’s seeking to tackle this disparity and focus on traditionally underserved regional ecosystems is a welcomed move and could shed greater light on these areas. This group isn’t alone in supporting underserved ecosystems either. To its credit, Barclays Eagle Labs has made clear its intention to focus on a broader array of areas across the country since taking over the Digital Growth Grant fund at the expense of Tech Nation.

Eagle Labs said 80% of the startups it plans to support will be from “outside London”, which should be applauded. 2021 programmes run by Tech Nation, by way of comparison, saw only 58% of participants from outside the capital.

An ode to the 'real' North

Looking at Scotland’s tech ecosystem as an example, there have been frequent complaints about the lack of VC investment over the years despite consistently strong performances by the country’s tech sector. Excusing my tartan-tinted glasses for a second, Scotland’s tech startup scene is perhaps the best example of a high-performing ecosystem in the North - the 'real' North, if we’re being pedantic – that has been consistently overlooked. 

There are institutional issues at play here, not least of all the fact that Scotland’s underlying startup infrastructure has required a government-backed cash boost to create dedicated tech hubs for founders. However, recent statistics from the British Business Bank speak for themselves. The state bank ranked Edinburgh as the UK’s top ‘innovation-led’ cluster for equity deals outside of the Golden Triangle. Evidently there’s a dearth of quality in this particular city, so any efforts to continue raising awareness and pour much-needed cash into the ecosystem will do wonders long-term. 

Glasgow, Scotland's larger, grittier city with a deep history of manufacturing and industrial excellence, is also making a strong case for itself. The city recorded 8% growth in VC funding during Q2 2023 amidst a period of torrid conditions for firms. It also now ranks third on a list of UK cities for VC investment, behind Manchester and Birmingham. It’s important that investors recognize the sector north of the border for what it is – ripe with opportunity and a chance to target a veritable goldmine of exciting companies. 

Scotland as a whole has also been punching above its weight in recent years despite macroeconomic challenges. While venture capital investment across the UK dipped in 2022, KPMG research shows that the Scottish ecosystem bucked industry trends and raised a record-breaking amount. If Scotland can do this, then there’s nothing to suggest regions in the north can’t do the same. 

Banking on regional strength

Manchester, Liverpool, Leeds, and Newcastle all boast strong tech ecosystems. The former of the aforementioned cities raised a record amount of funding across 2022 – £532 million in total. This marked the highest volume of VC investment in any city outside of London and the Southeast and secured Manchester’s place as the best-funded ‘northern’ tech hub. Better still, Manchester-based startups raised £1.8 billion in VC funding between 2018 and 2023, more than firms in major European capitals.

If the UK is serious about retaining its position as a leading global tech hub, its regional neglect needs to change. Investment will go a long way, but championing startups from regional ecosystems and acknowledging the merits of cities such as Manchester, or Edinburgh, is equally powerful. Whether or not London-centric investors, politicians, and industry talking heads will adopt this approach is another question entirely, but there are positive signs on the horizon.