According to the Tech Nation 2017 report, the UK’s digital economy is growing twice as fast as the wider economy with an estimated turnover of £170 billion. Of this a remarkable £114 billion was linked to companies outside of the M25.
With the rest of the UK giving London such a run for its money, what are the benefits of being outside the capital and how best can you secure funding if you are thinking of launching your startup or growing your business in one of the regions’ many towns and cities enjoying a thriving tech scene?
Location, location, location
Key to securing funding is proving you have a viable business proposition and it’s surprising the extent to which location can be a key factor in that.
Lower startup costs are an obvious benefit, though with places such as Cambridge now rivalling London regarding property prices, this is no longer true for all. What Cambridge does offer, however, is a world class university: With many tech clusters growing up around university towns it is clear the important role the UK’s world class higher education is playing in the success of tech.
As Tech Nation reported, the UK is home to eight of Europe’s top 20 universities – and half of these universities (Oxford, Cambridge, Edinburgh and Manchester) are outside the capital. Locations such as these have not only become hotbeds of skill, talent and innovation, they attract significant investment too. In fact, in 2016 nearly 70% of all digital tech investment went to tech clusters outside of London. Take London out of the equation, and the rest of UK is still attracting more than twice the investment in tech than any other European country. It is apparent there are clear attractions to investors for those companies based outside the capital.
There are also generous government backed investment schemes linked to the regions specifically designed to keep top talent in the city, ensuring a clear pathway for local graduates. Start-ups and young companies that can prove their ability to create knowledge jobs aligned to future focused industries will always have a head start.
Investors want to invest in ‘hot’ new areas such as fintech, regtech, cybersecurity or AML. This, combined with the fact that many middle office functions such as compliance and onboarding, are being moved (or have been moved) outside of London, means towns and cities across the UK offer a wealth of opportunity for FinTech and RegTech firms who support these functions.
When it comes to ‘hot’ areas, regtech is undoubtedly top of the list. The UK may be a major player on the international stage, but when it comes to deals in regtech it is leading the world.
Compliance with the AML regulations is taking an ever-greater toll on time and resources for organisations across financial and professional services. JP Morgan Chase’s annual report for 2015 showed the company spent $9bn on ‘controls’. The fact that this was up $3bn from 2011 shows how quickly the regulatory burden has grown. Businesses are fast realising embracing regtech is crucial if they are to maintain profit margins, reduce compliance and keep up with competitors. It’s therefore no surprise this is an area ripe for investment.
Making your mark
To secure that investment, making your mark is crucial. Establishing yourself outside of the capital can make it easier to create your own identity. Whether a start-up or an overseas business opening your first office in the UK, the first location you choose to go to is hugely important. Being in a place where you can prove your product is good and that there is a market for it will also help secure further funding enabling you to grow.
The issue for some companies as they look to expand internationally is the need to gain access to some of the larger banks and professional services firms and being in the regions can help with this. For example, Scotland has been successful in attracting some of the larger professional services firms as well as financial services, meaning fintech firms there have easier access to major players than they would have if they were based in London.
Staying in the black
Taking on debt can be dangerous: The pressure to service a debt or loan can cause businesses to make decisions that aren’t always in the best interest of a company. In the Software as a Service world (SaaS) it is far better to fund a company via equity. If your product is good and the market is right, investment will follow. Not securing investment may be a sign that you need to refine your business model.
The same goes for choosing investors – ensure they are like-minded and share your vision. If they’ve had success in the past this could be a good indication of what is possible for the future. With regard financial technology, few would disagree that the opportunities are immense.